Sunday, February 7, 2010

True or false:Controlling inflation is more important than controlling unemployment.?

idea 1: inflation has an ';invisible hand'; to control it...ie when inflation devalues the american dollar to a certain point; people spend substatially less money on luxuries, and luxury item companies react and make their product more affordable...which is reflected in a sort of ratio of cost between necessities and luxuries and whatever falls inbetween... now idea 2: we, as a nation, expect unemployment. we have a certain, budgeted amount of money set aside to compensate for that. Now lets assume two things...1 - that idea 1 is true and that idea 2 is true. 2 - that in the instance that this original question is posed, neither inflation nor unemployment is so out of control that it is causing ';economic anarchy'; Assuming all of this... it would make it more important to control inflation because it is not prepared for in the same way that unemployment is...plus (as a side note, and you thought i was done...) inflation causes each dollar to be worth less money...therefore, theorhetically, people are recieving smaller paychecks...and it leads some to get secondary (or even tertiary) jobs or to work additional hours, which begins to take up hours that are availible from employers...and when companies move less product, they have less hours of work to provide to those that work for them....think about it...True or false:Controlling inflation is more important than controlling unemployment.?
That is actually a very interesting question. During the great depression in the 30s the US was hit very hard with unemployment. When the great depression hit Germany (for example), inflation was the real killer of their economy.





Because of what happened during the great depression the US government has done what they could to control spiralling unemployment rates, because that's where the pain was. In most of Europe, they try to contain inflation. In a macro-economic way 1 does do a little to control the other.True or false:Controlling inflation is more important than controlling unemployment.?
I think both go hand in hand in some shape or form.

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