The paper "The Relationship between Inflation and the Rate of Unemployment - Philips " is a perfect example of a micro and macroeconomic case study. Unemployment and inflation represent two of the greatest macroeconomic problems that many governments struggle with. Unemployment is not only a problem in less developing and developing countries but it is also a problem in developed countries (Resurreccion, 2014). Many researchers have attempted to investigate the relationship between unemployment and inflation. For example, Resurreccion (2014) attempted to investigate this relationship in the Philippines using the Phillips Curve and Okun’ s Law.
Unemployment represents the condition of an individual with an ability to work having no job despite making attempts to actively search for a job (Rafiq et al. , 2010). According to ILO (2010), the unemployed population refers to a group of people above a certain specified age and who are available for employment but have not been able to secure the supply of labor for the production of goods and services. Unemployment has a great effect on many economies around the world and it has led to an increased rate of poverty in many countries, especially the less developed and developing countries.
Therefore, unemployment and inflation cannot be distanced from a market economy. The two have many socioeconomic consequences for the citizens in nations that they occur. Some of the terrible consequences associated with unemployment include declining incomes hence low purchasing power leading to citizens’ inabilities to raise their living standards. On the other hand, inflation is commonly referred to as ‘ the enemy of society” because it leads to increasing prices of products and services (Alisa, 2015).
Inflation is often considered to be a disaster. Different economists have attempted to analyze the relationship between unemployment and inflation based on the Philips curve. These economists usually construct short-term and long-term Philips curves. The present paper is going to investigate the connection between inflation and unemployment based on studies by economists about the Philips curve. In 1958, Alban Phillips, then, a Professor in the London School of Economics made a great contribution towards the study of the connection between inflation and unemployment (Alisa, 2015).
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