Unemployment and Inflation

In This Chapter

  • Understanding the unemployment rate
  • The natural and actual rate of unemployment
  • Categories of unemployment: frictional, structural, and cyclical
  • How unemployment and inflation are related
  • Factors considered in creating unemployment policy
  • Understanding the Phillips Curve

Unemployment and inflation: why are these seemingly unrelated topics paired? What’s the connection? You might have heard that, at least in the United States, monetary policy is aimed at keeping unemployment low and prices stable. That gives us a clue that there is a relationship between unemployment and inflation. At a minimum, ...

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