Question

Which problem do you believe is more serious: unemployment or inflation? Explain your answer.

Answer 1

Answer- Inflation refers to the rise in prices of goods and services and thus reducing the purchase value of money. Unemployment refers tothe percentage of people who are unemployed that is without a paying paying job but are available for work. Both are an important concepts in economics. Following are some points we can consider to study the impact of each force in deriving which variable is more important.

• Unemployment leads to less productive people and there is no economic growth. While inflation leads to rise in prices only, which eventually leads to less purchasing power.

•Unemployment leads to no money in the people’s hand thus they are not able to enjoy any standard of living. While inflation leads to rise in prices and people can resort to less expensive things and can lower their standard of living while they have still some money left to save.

• Lower the unemployment rate than the normal rate means that economy is growing at a faster rate than it’s nornal rate and it also means high level of inflation vice-versa is also true.

• Any country will have a certain level of inflation and can sustain if it has good policies but if a country has low unemployment level then it can never prosper. Thus, a country should focus more on unemployment than inflation.