Question

In France there are very strong unions and laws that protect workers from being fired. Do you believe that the short-run tradeoff between inflation and unemployment would be the same between the United States and France?

A reworded answer would be greatly appreciated.

Answer 1

According to short-run Philips curve, the unemployment and inflation are inversely related. When the unemployment rate goes up the inflation rate goes down. Both France and the United States have similar kind of regulations for employment and both the countries rely on the union heavily for the job safety. So the short-run tradeoff between inflation and unemployment would be similar. The employees in both the countries have rules that give the employees an option to retain their job even if they are not performing well because of their association with the unions. Both the countries also have a similar rate of inflation of around 2%. This has also affected the employment opportunities in the countries with more number of people going unemployed. So they need to find a balance between the inflation rate and the unemployment to create a stable economy and also an environment where people get equal opportunities to work.