Unemployment & Inflation

INFLATION

•  the rising price of goods and services over time. It's an economics term that means you have to spend more to fill your gas tank, buy a gallon of milk or get a haircut. Inflation increases your cost of living.

UNEMPLOYMENT

• defined as a situation where someone of working age is not able to get a job but would like to be in full-time employment.

 PHILIP CURVE

• The inverse relationship between unemployment rate and inflation when graphically charted is called the Phillips curve. William Phillips pioneered the concept first in his paper "The Relation between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861-1957,' in 1958. This theory is now proven for all major economies of the world.

STAGFLATION

• a combination of stagnant economic growth, high unemployment, and high inflation. It's an unnatural situation because inflation is not supposed to occur in a weak economy. Consumer demand drops enough to keep prices from rising. Slow growth in a normal market economy prevents inflation.

Structural Unemployment 

• Changes occur in market economies such that demand increases for some jobs skills while other job skills become outmoded and are no longer in demand. For example, the invention of the automobile increased demand for automobile mechanics and decreased demand for farriers (people who shoe horses).

Frictional Unemployment 

• This type of unemployment occurs because of workers who are voluntarily between jobs. Some are looking for better jobs. Due to a lack of perfect information, it takes times to search for the better job. Others may be moving to a different geographical location for personal reasons and time must be spent searching for a new position.

Cyclical Unemployment 

• This occurs due to downturns in overall business activity.