explain with graph. why inflation and unemployment are two main issues studied in Macroeconomics.

Expert Solution

As we know inflation is a general rise in the price level in an economy over a period of time.

The inflation generally reduce the value of money. The value of money depends on the purchasing power of money, when price go up, the purchasing power of money decline. Due to which the consumption level reduce. Hence the inflation is the main issue studied in macroeconomics.

The unemployment is measured by unemployment rate, which is the number of people who are unemployed as a percentage of the labour force.

When unemployment level is high in the economy it give negative impact in the economy. Unemployment causes waste of resources, increase poverty, social unrest etc. So the unemployment is the main issue studied in macroeconomics.

The relationship between unemployment and inflation shown by Phillips curve.

The Phillips curve show that there is inverse relation between the inflation and unemployment. When inflation rises the unemployment decreases.

Rahul Sunny answered 2 years ago

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