Principles of Microeconomics, 7th Edition

Published by South-Western College
ISBN 10: 128516590X
ISBN 13: 978-1-28516-590-5

Chapter 1 - Part I - Ten Principles of Economics - Questions for Review - Page 17: 10

Answer

Inflation and unemployment rate is negatively related in the short run.

Work Step by Step

For example: if the company decides to reduce inflation rate, they will decrease the amount of money. This will make the overall demand for goods of the society decreases as well. Lower demand for the good will causes firms to decrease their price. They will likely to cut the employee numbers to save the cost and because there is no need to produce large amount of goods. This will result in higher unemployment rate.
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