a. If you were macroeconomic policymaker, how do you balance the short-run tradeoff between inflation rate and unemployment rate? Explain. b. What is the historical relationship between rates of unemployment and inflation in the U.S. economy? What are the most current figures for the unemployment rate and the inflation rate? What does this say about the U.S. economy today?
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Finance: Discussion Questions
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How to Balance the Short-Run Tradeoff between Inflation Rate and Unemployment Rate
According to (McTaggart, Findlay & Parkin, 2012, p. 606) one of the methods that are employed in the study of inflation cycles involves the use of the relationship and the short-run trade-off between inflation and unemployment. In the short-run, there is a trade of between the unemployment and inflation in the economy.
As a microeconomic policy maker, to balance the short-run tradeoff between inflation rate and unemployment rate, there is need to set the expected inflation rate and natural unemployment rate. In the short-run, any policy that leads to an increase in inflation increases the rate of unemployment, while a policy that leads to reduction in inflation leads to reduced unemployment rates. In setting the expected inflation rate and natural unemployment rate, a balance in the short-run trade-off between inflation and unemployment rate can be achieved.
Historical Relationship between Rates of Unemployment and Inflation in the U.S. Economy
The historical relationship between the rates of unemployment and……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….
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