Question

What is the importance of inflation and unemployment on GDP?

What is the importance of inflation and unemployment on GDP?

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Answer #1

inflation has a very much importance on the GDP level and this is because if the inflation rate is very high then the GDP would also be high but when you consider it in real terms, the level of GDP would be lower which is something not desirable. Here unemployment is also a factor where if the unemployment is high then GDP will be lower and vice versa where during an expansion when the GDP is growing the unemployment rate is closer to natural rate of unemploymentand the GDP is reducing then the unemployment is increasing or high

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