An increase in the government expenditure as a result of the outbreak of war, developmental and welfare activities causes an increase in the aggregate demand for goods and services in the economy. The combined demand-cum-cost inflation is illustrated in Figure 6. In order to comprehend the positive relationship between inflation and unemployment first, we must know what inflation is, how we define unemployment, and how we can use the Phillip, By the beginning of the 1980s, double-digit rates of inflation had become so pervasive among industrialized economies that they were viewed as a major deterrent to global economic growth. But meanwhile, wages and salaries of people have risen to a great height, compared to the ‘good old days’. 11.2) where we measure output on the horizontal axis and price level on the vertical axis. However, slight dose of inflation is necessary for economic growth. The Quantity Theory Approach or Inflation Tax Argument: According to the quantity theory approach; (a) during sustained inflationary period, the behaviour of all sectors of economy will become adjusted to the expectations of inflation, and consequently, (b) the effect of inflation will be, not to redistribute income from wage-earner to profit-earners, but to redistribute it from the holders of money balances to the monetary authorities who issue money. Former is called demand-pull inflation (DPI) and the latter is called cost- push inflation (CPI). Consumers are not able to afford the goods and services because of the high prices. Broadly, the phenomenon of inflation has been understood in three ways- (a) in the popular sense, (b) in the Keynesian sense, and (c) in the modern sense. Johnson regard inflation as a phenomenon of rising prices. With this hint in mind, this paper aims at evaluating the reasons why the numerous efforts by the Japanese government and the Bank of Japan have failed miserably in rescuing the economy of the country. But, it is not easy to reduce cost of production through such measures; a reduction in wage rate, for example, will be strongly opposed by the workers. The aim of the paper is to summarize the article on unemployment and establish a connection between the article and the economic theories unemployment.

In case you’re able to keep the money supply growth under control, then you should be able to keep inflation under it as well.

With anticipated inflation, people can build up their strategies to cope with inflation. As a result, the multiplier effect of investment will come into operation resulting in higher national output. Profit tends to rise during inflation. It means a gap arises between the generation of money income and the final availability of goods. The structuralist view of inflation as advocated by the Latin American economists can be summed up in the following two propositions: (i) Whereas inflation in developed countries is associated with full-employment policies and the labour market response to these policies, inflation in the developing economies is associated with the developmental effort and the structural response to the effort. Nonetheless, the side policies supply can take a long period of time and, what is more, is cannot deal with the inflation that is the result of the rising demand.

When the recession is severe, there is an increase in the rate of national unemployment and hence a rise in the number of unemployed individuals in the society. Anyway, people are harassed ultimately by the high rate of inflation. According to him, inflation is the result of the excess of aggregate demand over the available aggregate supply and true inflation starts only after full employment.

Finally, real value of tax revenue also declines under the impact of hyperinflation. It is the true inflation (after full employment), which poses a real threat to the economy and is to be worried about. When the foreign demand for domestically produced goods increases, it raises the earnings of exporting industries. In this case, the prices of some goods increase due to certain physical bottlenecks which adversely affect the production of these goods.

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