Inflation and Unemployment--Huh?

I don%26#039;t understand the link between inflation and unemployment very well. Let me run by some question marks and see if I get somewhere. This has to do with my broader understanding of the US immigration issue, as strange as that seems

1) Briefly, how are inflation and unemployment linked?

2If inflation can rise steadily through history, then how does unemployment remain at a nice 5-6%?

3) Someone once told me that the federal reserve is able to control inflation and thus control the rate of unemployment. Is this true?

3a) How does the federal reserve do this really, if this is true?

3b) Why is maintaining a certain level of unemployment desirable?

4) Would a sharp increase in population, say from an immigration rush, affect unemployment levels? Would it affect inflation levels?

Inflation and Unemployment--Huh?mortgage lenders

the first answerer is either joking with you, or he must be answering from a non-academic point of view.

1) short run philips curve explains it. increase inflation, decrease unemployment, the converse is true.

2) short run philips curve has been disproved over the years, hence proving that inflation and unemployment doesnt really have a strong coorelation, if any exists. this is because stagflation can set in and disrupt the rules of the short run PC.

stagflation sets in when inflation causes higher production costs -%26gt; supply curve shifts in -%26gt; thus there is less output and worse unemployment rate. thus, delibrate inflation makes the situation worst off, instead of helping it.

3) delibrate spending or release of moneys through open market operation, can cause inflation as there is an influx of money supply and demand now.

3a) same as 3).

3b) its desirable because unemployment brings with it problems such as social costs. also, volatile unemployment rate means a very volatile business cycle of the society in question.

4) yes, and yes. can go both ways, depending on how you argue it.

Inflation and Unemployment--Huh?

loan

1. Inflation creates a cash-cow for those who create the money, causing goods and services to increase in cost. This increases the cost of domestic goods and services but not foreign made goods %26amp; services. Being unable to compete, domestic manufacturers to go out of business. This creates unemployment.

2. Automation and computers cause manufacturing costs to go down, inflation eats that profit, the result is a zero sum and the stats remain the same.

3. The fed adjusts interest rates based on economic factors to control unemployment. But it%26#039;s stop gap and not a true negative feedback control mechanism. Interest rates should be market driven, not artificially manipulated to control market forces.

3a. Answered. (interest rates)

3b. It%26#039;s not.

4. People are an asset. The work people do creates goods and services . . . essentially, it%26#039;s people that create wealth.

As the population increases due to birth rates or immigration, the wealth is siphoned off by the fed, so all other factors remain the same and it appears as though nothing changed while the banksters enjoy their mansions and yachts and the buying power of the enslaved masses diminises to pay for it.|||1) If inflation goes UP, unemployment goes DOWN.

Think of it this way. If you notice the price of goods going up constantly (inflation)... you will try to buy everything as quickly as possible before the price goes up even more. This increase in demand causes an increase in employment.

However, if inflation gets out of control, or becomes unstable... this can cause various other problems which can eventually cause unemployment to increase - particularly if banks cannot predict how much their cash will be worth in the future - or if people lose faith in cash and stop using it.

2) In recent history (past 10 years or so), inflation in most developed countries has remained stable. Also, countries nowadays trade with eachother more than ever. Let%26#039;s say in China there is excess goods, causing prices to go down there (deflation) - it can then export its cheap goods elsewhere, causing prices there to drop too, in effect decreasing their inflation rate.

3a) In the USA, the federal reserve DOES control inflation... because it controls the base interest rate. The federal reserve loans money to all the banks of the USA. If the federal reserve wants to increase interest rates (make money more expensive to loan)... this will decrease the amount companies spend, which decreases demand, which will lower inflation.

3b) If there is unemployment, there are people who want jobs and are willing to except lower wages. By lowering wages that are demanded, prices can also be lowered - in effect, lowering inflation.

4) It would take a while for the immigrants to get jobs, therefore increasing unemployment rate. When companies notice they can take advantage of the fact that so many people need jobs... they can lower wages. Lower wages can cause lower prices - this will decrease the inflation rate.