Question

The bank of Jamaica states that inflation is under control in the country.

1. Discuss the concept of inflation and identify its relationship if any to unemployment/employment.
     
2. Assess the ability of the central bank to control inflation.

Answer 1

Inflation is a quantitative measure of the rate at which decreasing purchasing power of a nation due to rise in price level

There are different types of inflation depending upon the cases like demand pull inflation,cost push inflation.,creeping in inflation and so on .

When inflation is high,unemployment is low and vice versa

Relationship between unemployment and inflation explained by Phillip curve

Central banks can charge the interest rates ( high /less ) and can increase or decrease the money supply to change the demand which help to control the inflation rate .

But to increase the employment rate it is important that firm should try to invest more to generate more output which leads to investment. Such investment takes place when there is full or sufficient demand for the good or services

More investment, more output , more employment, more income , more consumption, more saving , more investment hence it is cycle of national economy

Hence it is not monetary policy that can increases the employment fiscal policy is also important matter

Therefore government instruct the central bank to control inflation and increase the employment .

To increase the employment interest rates are reduces and more money supply flow in the market for the firm to invest in their business hence" More EMPLOYMENT   OPPORTUNITIES COMES FROM HIGH INFLATION RATE".