Question

1. How do inflation and unemployment relate to the interest rate?
2. What is the relationship between wage growth and inflation?

Answer 1

When interest rates are decreased, it leads to the borrowing of more money. The result is that there is more money with the people to spend, which in turn leads to the growth of an economy and inflation to increase and vice versa. The relationship between inflation and unemployment has traditionally been an inverse correlation or you can say there is a negative relationship between the two. While in case of wage growth and inflation there is a positive relationship between the two.