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    Irdina Faizi
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    The main trade-off in macroeconomics is between inflation and employment. Governments must choose whether to prioritize lowering inflation or unemployment. There is an inverse relationship between inflation and unemployment - higher inflation generally means lower unemployment, and vice versa. For example, in the U.S. in the late 1970s and early 1980s, inflation fell dramatically from 15% to 2.5% as unemployment increased from 5% to 11%. Governments must decide which of these factors to focus on in order to maximize societal welfare during different economic conditions.

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    The main trade-off in macroeconomics is between inflation and employment. Governments must choose whether to prioritize lowering inflation or unemployment. There is an inverse relationship between inflation and unemployment - higher inflation generally means lower unemployment, and vice versa. For example, in the U.S. in the late 1970s and early 1980s, inflation fell dramatically from 15% to 2.5% as unemployment increased from 5% to 11%. Governments must decide which of these factors to focus on in order to maximize societal welfare during different economic conditions.

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    © All Rights Reserved
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    383 views1 page

    Sexi Paragraph Week 1

    Uploaded by

    Irdina Faizi
    The main trade-off in macroeconomics is between inflation and employment. Governments must choose whether to prioritize lowering inflation or unemployment. There is an inverse relationship between inflation and unemployment - higher inflation generally means lower unemployment, and vice versa. For example, in the U.S. in the late 1970s and early 1980s, inflation fell dramatically from 15% to 2.5% as unemployment increased from 5% to 11%. Governments must decide which of these factors to focus on in order to maximize societal welfare during different economic conditions.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    of 1

    What is the main trade-off in macroeconomics discuss with reference to inflation and

    employment?

    In economics, trade-off is a situation where it is required to make a decision to give up on


    one item that we like in order to get what we like the most. Trade-off in macroeconomics is
    when government has to make a decision and sacrifice another thing to maximise the
    welfare of society. Government has to make a choice on whether to experience inflation or
    experience a high unemployment rate. The relationship between inflation and
    unemployment rate is negative where the higher the inflation rate, the lower the
    unemployment rate. For an example, in US economy between 1979 and 1983, the inflation
    index fell as much as 12.5% from 15% to 2.5%. At the same time, there was a growth in the
    rate of unemployment from 5% to 11%. There was a declined in the rate of inflation from
    5% to 2% while there was a significant increased in unemployment from 5% to by just over
    10% in 2008. Therefore, all government’s decisions regarding inflation and unemployment
    rate have to consider on what is needed more by the society during that particular time to
    maximise their welfare.

    References:

    https://www.economicshelp.org/blog/571/unemployment/trade-off-between-
    unemployment-and-inflation/

    https://courses.lumenlearning.com/boundless-economics/chapter/the-relationship-
    between-inflation-and-unemployment/

    https://mnmeconomics.wordpress.com/2011/07/08/the-trade-off-between-inflation-and-
    unemployment/

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