INFLATION AND

UNEMPLOYMENT
Presented by: Hassan Aziz
Unemployment

 In economics, unemployment refers to the condition of unwanted job losses, or

willing workers without jobs.
 The willingness of the unemployed workers to be employed is the key to the idea.
 Seasonal unemployment/technical unemployment/structural unemployment.
Inflation

 Sustained increase in the price level.

 Downfall of the value of the money.
 An increase in overall level of prices in the economy.
 When the level of currency of a country exceeds the level of production, inflation
occurs.
 Can be measured by two ways: Consumer price index & Producer price index.
Effects of Inflation

 It adds inefficiencies in the market and make it difficult for companies to budget
or plan long-term.
 The uncertainty about the future purchasing power of money discourages
investments and savings.
 Higher income tax rates.
Phillip Curve

 A negative correlation between the rate of inflation and the rate of unemployment.
 This trade-off between inflation and unemployment occurs in short-run.
 There is no trade-off in long-run.

Natural rate
of
unemployme
nt
Why do we face this short-run trade off?

Govt. People
reduces
Prices are sticky in the
quantity of spend short-run.
money less

Unemploy- Firms Reduction in

quantity of
ment lay-off goods &
increases
workers services sold
Thank You!