Relationship Between Inflation and Unemployment :: Economics

Inflation and unemployment atomic number 18 two key elements when evaluating a whole economy and it is similarly easy to get those figures from National toilet table of Statistics when you want to evaluate it. However, the relationship amidst them is a controversial topic, which has been competed by economists for decades. From some historied economists such as Paul Samuelson, Milton Freidman etc to some notorious economists, this topic received a lot of attention. However, it is this debate that makes the thinking more or less it evolve. In this essay, the controversial topic will be discussed by showing different economists opinions on that according to time sequencing. But before started, it is valued getting a better understanding of the terms, flash and unemployment.Inflation refers to an annex in overall level of prices within an economy. In simple words, it federal agency you have to pay more money to get the same union of goods or services as you acquired before . By contrast, the term unemployment is easier to understand. Generally, it refers to those people who are available for work but do not find a work. And unemployment rate, which is the percentage of the labour force that is unemployed, is usually used to measure unemployment (Mankiw 1992).The debate of the relationship between inflation and unemployment is mainly based on the famous Phillips fold. This curve was first discovered by a mod Zealand born economist called Allan William Phillips. In 1958, A. W. Phillips published an article The relationship between unemployment and the rate of change of money wages in the United Kingdom, 1861-1957, in which he showed a negative correlation between inflation and unemployment (Phillips 1958). As shown in figure 1, when unemployment rate is low, the inflation rate tends to be high, and when unemployment is high, the inflation rate tends to be low, even to be negative. Figure 1 Phillips CurveTwo years later, economists Paul Samuelson and Robert Solow, who are the most infusive representatives of Keynesian School, also published an article, showing the same negative correlation between inflation and unemployment, based on the United States economic data (Samuelson and Solow 1960).