Question

Define inflation and the unemployment rate. Why don't we like (too much of) either of them?

Answer 1

Inflation:

• Inflation refers to the rise in the price of most goods and services of daily or common use, such as food,clothing,housing,recreation,transportation, consumer staples etc.
• Inflation measures the average price change in a basket of commodities and services over time.
• it can be defined as: a gradual, steady increase in the price of goods and services.
• inflation can occur when price rise due to increase in production costs, such as raw materials and wages.
• Rising prices, known as inflation, impact the cost of living, the cost of doing business, borrowing money, mortgages,corporate, and government bond yields and every other facet of economy.
• when inflation is too high of course, it is not good for the economy or the individuals.inflation will always reduce the value of money, unless interrest rates are higher than inflation.

Unemployment Rate

• The unemployment is the percent of the labor force that is jobless.
• it is a lagging indicator, meaning that it generally rises or falls in the wake of changing economic conditions, rather than anticipating them.