Title: UNEMPLOYMENT, INFLATION, AND THE LIMITS OF MACROPOLICY
Abstract: This chapter focuses on inflation and unemployment. It presents a theoretical model that explains why high rates of unemployment and inflation can occur simultaneously. The chapter provides an overview of the Phillips curve. It is a curve that explains the relationship between the rate of change in prices and the rate of unemployment. The anti-inflationary policy will cause the rate of unemployment to increase temporarily. The cost of returning to stable prices once the inflationary psychology has permeated the economy will be an above-normal rate of unemployment. If the macropolicy is moderate but steady, it will eventually have an anti-inflationary effect. However, the deceleration of the rate of inflation may well come 6–24 months after the macrorestraint is instituted.
Publication Year: 1980
Publication Date: 1980-01-01
Language: en
Type: book-chapter
Indexed In: ['crossref']
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