I'll be completely open with this as I'm asking for some guidance towards what I should read into, not for someone to give me the answer!
I am studying Bsc Economics and this current assignment is worth 50% of my applied economics module mark for the year so I want to ensure I do not miss anything out!
"Examine the proposition that there exists a correlation between the rate of inflation and the level of unemployment. Explain the significance of your results."
I currently have in mind to:
- Talk about the Philips Curve (short term and long term effects)
- Talk about Friedman and stagflation
- Take ONS statistics for unemployment and inflation and perform a correlation coefficient
Any recommended reading, theories or suggestions of points that I should cover are very welcome.
Help me: Relationship between Inflation and Unemployment Watch
- Thread Starter
- 12-04-2013 16:25
- 13-04-2013 01:00
Make the point that unemployment only really influences the rate of inflation in terms of the part of inflation that is governed by wages. High unemployment usually means a tough labour market, weaker bargaining power for workers and unions, and slow wage growth. Low unemployment means a buoyant labour market and more bargaining power for workers who are in short supply.
However unemployment does not have impact on the price of individual commodities, food, oil, energy etc. These are set by supply and demand interactions in world markets. So if inflation is being driven by rising prices in these, then higher unemployment is not going to stop that.