Question

What is your understanding of the relationship between economic growth (GDP), high/low unemployment, high/low Inflation, high/low wages, and the way they impact one another?

Answer 1

Economic growth of a country is measured by comparing public sector investments, private sector investments,services ,tax revenues,number of goods produced , productivity increase/decrease with another particular year .Since it is measured as the increase in the total production of goods and services over a period of time in the inflation-led market ,it includes employment , inflation,wages etc . Relationship with unemployment:- with high economic growth a country usually has low unemployment owing to the requirement of optimal labour force because of high production ,and with low economic growth we usually witness high unemployment owing to the low output production.unemloyment and economic growth have inverse relationship ​that is if Unemployment falls economic growth rises .

Realtionship with high/low inflation :- production of goods and services include fixing the prices. if more number of goods are produced irrespective of demand the prices are usually low hence the money supply will be less and economic growth will also be low .If the demand is high we produce more goods and fix high prices where we require more employees where naturally GDP increases .If high inflation that is increased money supply or high prices prevail we normally high wages for employees where we can expect high consumption which drives high GDP.to summarise high inflation goes along with high GDP ,low inflation goes along with low economic growth.

Relationship with high/low wages :-when production is increased/decreased with respect to the level of productivity .High wages are paid for skilled labour in order to enhance productivity which is a sign of economic growth . In developing and underdeveloped countries people are paid low wages but the production of goods and services will be maximum that is economic growth may be high .So here classification of high or low wages don't imply the economic growth but high wages when production is high surely implies high GDP.when wages are lower consumption power of people will decrease so the demand for products will decrease which in return decreases the production hence economic growth will come down .So balancing between High and low wages is a must for economic growth.