Impacts of inflation and unemployment on the economy Free Essay

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Impacts of inflation and unemployment on the economy

The level of unemployment and inflation in an economy are often closely related. Periods of high levels of unemployment often have low inflation rates, while low levels of unemployment are associated with high levels of inflation, which can have a negative impact on economic growth. Unemployment is the existence of a section of the labor force where the aggregate demand for labor is less than the aggregate supply for labor, so that there is an increase in the proportion of the workforce who are willing and able to work, but cannot find work. Inflation is the sustained increase in the general level of prices over a period of time, usually over a year. As previously mentioned both inflation and unemployment impose costs upon the econo

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