What is the relationship between inflation and unemployment called?
Table of Contents
- 1 What is the relationship between inflation and unemployment called?
- 2 What is the relationship between inflation and unemployment in the long run?
- 3 What explains inflation in China?
- 4 Why is the relationship between unemployment and inflation different in the short run?
- 5 Why China has high inflation?
- 6 Does China experience inflation?
What is the relationship between inflation and unemployment called?
The Phillips curve is the relationship between inflation, which affects the price level aspect of aggregate demand, and unemployment, which is dependent on the real output portion of aggregate demand.
What is the relationship between inflation and unemployment in the long run?
Key terms
| Key term | Definition |
|---|---|
| long-run Phillips curve (“LRPC”) | a curve illustrating that there is no relationship between the unemployment rate and inflation in the long-run; the LRPC is vertical at the natural rate of unemployment. |
How do inflation rate affect unemployment?
Lower unemployment rate can be achieved at the expense of higher inflation while lower inflation can be obtained by sacrificing employment. It is important to note that the inverse relationship between inflation and unemployment only holds in the short-run.
What explains inflation in China?
The year 1998 seems to be a structural break in inflation evolution. Overall, the paper confirmed the hypothesis that inflation in China is largely driven by excess money supply, and is correlated with changes in food price level.
Why is the relationship between unemployment and inflation different in the short run?
Society faces a short-run tradeoff between unemployment and inflation. If policymakers expand aggregate demand, they can lower unemployment, but only at the cost of higher inflation. If they contract aggregate demand, they can lower inflation, but at the cost of temporarily higher unemployment.
Why are unemployment and inflation unrelated in the long run?
In the long run, unemployment returns to the natural rate, while inflation is at a higher level. Thus, both factors (changes in inflationary expectations and supply shocks) cause the Phillips Curve to be vertical with no long run tradeoff between inflation and unemployment.
Why China has high inflation?
Xu Hongcai, deputy director of the economic policy commission under the China Association of Policy Science, said that the cause of the higher CPI was the price pressure transferred from upstream producers as PPI hit its 26-year high, although the rise of consumer inflation also resulted from higher vegetable prices …
Does China experience inflation?
China has experienced remarkably stable growth and inflation in recent years according to official statistics.