Question

When considering which monetary policy to implement, the Central Bank needs to also be conscious of the tradeoff between

Answer 1

There is increase in unemployment rate due to a lot of factors. The Central Bank needs to also be conscious of the tradeoff between unemployment and inflation.

An increase in unemployment rates will often result to decrease in inflation  and vice versa. The short-run Phillips curve depicts that in the short-term a  tradeoff exist between inflation and unemployment.

A conflict is known to exist between inflation and unemployment . A trade of  often takes place between unemployment and inflation.

In a time of high growth, there tends to be more jobs that are created, causing unemployment to fall. If unemployment falls, it often place an upward pressure on wages, leading to inflation.

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