Question

Country T is facing with high unemployment and high inflation problems. Assume that you are the...

Country T is facing with high unemployment and high inflation problems.
Assume that you are the senior economist in Country T. The Prime Minister
seeks for your advice between a policy that head off the increase in
unemployment and increases in inflation. What would you advise? Criticall evaluate.

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Answer #1

There is an inverse relationship between unemployment rate and inflation rate. This means that of unemployment rate decreases, inflation rate increases. So choosing between any one policy means letting the other one increase.

As a Senior economists, I would suggest prime minister to adopt the policy that will decrease unemployment rates. This will obviously lead to an increase in inflation rate but when people are employed and earning, they are able to afford things they need and will be able to manage theri expenses in the time of inflation. In other words, being employed will help people to earn money, their standard if living will be improved and they will be able to afford basic necessities of life. This way people will cope up with inflation and problem of inflation will be partially solved.

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