Topic: Relationship between unemployment and Inflation rates

Problem: Unemployment decreases when inflation increases. On the other hand,

higher unemployment results in reduced inflation.

Objectives: One of the fundamental goals is to develop and maintain price stability,
which is frequently defined by low and predictable inflation rates. Understanding how
changes in unemployment affect inflation helps policymakers adopt inflation-control
strategies.

Variables:

Independent:
Monetary policy - specifically central bank like ( Bangko Sentral ng Pilipinas) interest
rate changes, impacts unemployment and inflation. Tighter policy leads to increased
borrowing costs, decreased spending, and higher unemployment, resulting in a
decrease in inflation.

Dependent:
Cost-push Inflation - High inflation can lead to higher unemployment due to cost-push
factors, such as rising oil or raw material prices. Businesses may reduce production, cut
jobs, or limit wage increases to offset these costs, resulting in higher unemployment.

Local/Respondent: People who are unemployed and experiencing the inflation.