The Positive Relationship Between Inflation And Inflation

Some variables in Economics are very closely related to each other. In many cases, the combination of these variables can have an unexpected effect on the economy. One of these examples can be observed when we compare inflation and unemployment rate. To establish this comparison in a short-run period of time, it will be beneficial to use the Phillip Curve. This curve can be used as a tool to represent the positive relationship between inflation and unemployment in the short-run. In order to comprehend the positive relationship between inflation and unemployment first, we must know what inflation is, how we define unemployment, and how we can use the Phillip Curve to make a functional comparison of these two variables. Moreover, it will be very beneficial to analyze how expansionary fiscal policies affect the relationship between unemployment and inflation. If we understand the meaning of each of these variables in the economy, it will be easier to comprehend the logic of a short-run trade-off between unemployment and inflation. Inflation can be described as the sustained increase in the level price of goods and services over a period of time. Inflation can affect the economy in positive and negative ways. One of the negative ways in which inflation affects the economy is that it increases the opportunity cost of holding money, in other words, it decreases the real value of money. Inflation is said to occur when there is an excessive increase in the money supply. AmongShow MoreRelatedPhillips Curve Methodology Is Used On An Information Set Of 35 Years Essay1623 Words   |  7 Pageshelps in analyzing the relationship in the middle of inflation and unemployment. There is a non-relative negative relationship in the middle of inflation and unemployment (if unemployment is decreased than there is a rising value level in the economy). 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