Unemployt inflation output 0810

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Unemployt inflation output 0810

  1. 1. Inflation Unemployment and Output
  2. 2. Cures for Inflation <ul><li>Balanced Budget </li></ul><ul><li>Control of money supply </li></ul><ul><li>Income control </li></ul><ul><li>Price controls </li></ul>
  3. 5. Is little inflation good for the economy
  4. 6. Unemployment <ul><li>This represents persons who were not employed during the reference week, but who were actively seeking work, waiting to be called back to a job from which laid off, or waiting to report within 30 days to a new payroll job. </li></ul>
  5. 7. <ul><li>Natural Rate of unemployment </li></ul><ul><li>Cyclical Unemployment </li></ul><ul><li>Duration of unemployment </li></ul><ul><li>Frequency of unemployment </li></ul><ul><li>Underemployment </li></ul><ul><li>Disguised unemployment </li></ul>
  6. 8. Relation between unemployment and inflation
  7. 9. Philips Curve <ul><li>Shows an empirical inverse relationship between the unemployment rate and increases in the nominal wage rate </li></ul><ul><li>Phillips curve suggested a clear policy trade-off between the rate of inflation and the unemployment rate </li></ul>
  8. 10. The Original Phillips Curve for the United Kingdom
  9. 11. Relationship of Inflation and Unemployment: U.S. 1961-2002
  10. 12. Relationship between unemployment and output
  11. 13. Okun’s law <ul><li>An increase of 1 % in unemployment would cause a gap of 2.5% between the potential GDP and the actual GDP </li></ul>
  12. 14. Okun’s law in the United States: 1954-1998
  13. 15. Sacrifice Ratio <ul><li>Relationship between inflation and output </li></ul><ul><li>Percentage of output lost for each one-percent reduction in the inflation rate </li></ul>

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