Which problem is greater: inflation or unemployment?
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Transcript of Which problem is greater: inflation or unemployment?
Which problem is greater: inflation or unemployment?
What is inflation? Inflation-sustained general rise in prices
Measures of inflation
Inflation rate-change in average
prices in an economy over a given period of
time.
Retail Price Index(RPI)
Consumer Price Index(CPI)
Types of inflation Creeping inflation-prices rise few percent
every year Hyper-inflation- large increases in price
each year
Inflation rate formula
Price index for year t
Price index for previous year
2007 2008 2009 2010 2011 2012 2013
-5
0
5
10
15
20
25
2007-2013 Inflation rates(CPI)
UkraineRussiaGreat BritainChinaSouth KoreaUsa
Causes of inflation:
Inflation
Demand-pull
Cost-push
Structural(Demand-shift)
Examples of inflation:Germany 1921-1923
• Was caused by the war.• 7 000 000 000 000% in 1923• Other countries that suffered inflation at
that time-Austria, Hungary, Poland, USSR
Serbia and Montenegro 1993-1995
Yugoslavia broke. Government printed money. Unemployment rose to 30% New currency “Dinar” was created. Inflation 5 000000000000000%(quadrillion) 12 Nov. 93 1 Deutsch mark=1million new
dinars 15 Dec.93 1DM=3.7 billion new dinars End of December 1DM=3 trillion new dinars. New new dinar created Novi dinar eliminated inflation
Zimbabwe 2004-2008
Unemployment Unemployed-those of working age who
are without work, but who are available for work at current wage rates
Labour force-those who are employed and unemployed.
UK government definition: Unemployed-people of working age who are without work, available to start working within 2 weeks and actively seeking employment, or waiting to take up an appointment
Feb 2013European Unemployment Data, courtesy of Eurostat
Types of unemployment Voluntary and Involuntary Frictional Unemployment Cyclical Unemployment Structural Unemployment Seasonal Unemployment
Costs of unemployment To employee-loss of earnings Lack of money cause problems in families Government gets less taxes (VAT) Firms lose profits Workers lose additional wages(higher
output) General increase of violence and crime
Unemployment
USA inflation and unemployment rates during the 1960s
Summary: Inflation and unemployment are essential
for economy Depending on inflation, unemployment
changes. Inflation is more crucial to control.
Sources http://index.minfin.com.ua/index/infl/ http://www.inflation.eu/inflation-rates/chi
na/historic-inflation/cpi-inflation-china.aspx
Sloman,J. Economics Pearson 2012 8th edition
Anderton A. Economics Causeway press 2007, 4th edition
Thank You!