Inflation and Unemployment in Germany

In any economy, no matter whether it is controlled by the government or by free markets, people need to work in order to support it. The government does not generate tax revenue by magic. There have to be people in that economy earning an income to ensure that the government continues to collect taxes. In a free market economy, the same applies because there are some services which only an organized government can supply (such as protection from extra-national threats), but there also those which the people get for themselves because of the working of the markets. In any scenario, unemployment is, at the very least, a drag on the economy, and it can be much worse. This paper examines how the unemployment rate in the United States is underreported, and how that fact effects the sluggishness of the present economy.

iii. How does the average annual growth rate you calculated in (ii) above compare to the average growth rate the U.S. normally expects?

1. What is inflation? Inflation is an increase in prices for goods and services (What is Inflation?).

The United States inflation rates are a problem, if the government were to control them then the United States would flourish from a “B+” economy to a “A” economy. In the United States (September, 2015) consumer prices went up 1.5%,

The Undesirable temporary connection between Price increases and Unemployment. The inflation is calculated along the perpendicular axis, and the unemployment percentage is calculated along the plane axis. This can disturb both the unemployment percentage or the price increases, it can disturb the splurging and the economy. It will partake in temporary impacts in anticipation of the economy being secure.

1). In 2016, the inflation rate was at 2.07 percent, and as of February 2017 the rate is about .90 percent (“Inflation Rate,” n.d.). As we can see, the economy has bounced back from its position during the recession. GDP has increased drastically since 2009, unemployment has decreased past its position from 2007, the interest rate has risen, and inflation has also gone up which indicates a strong and healthy economy. Although a higher interest rate is unfavorable for consumers and businesses, it means that the government is confident that the economy will continue to improve. This also means that consumers have enough disposable income to spend on whatever they wish, so the government does not need to lower the rate in order to encourage borrowing and spending. These metrics indicate that the economy has recovered from the Great Recession, and is continuing to improve.

Compile these pieces into a coherent recommendation to Ms. Jones. Should she bring her guava jelly business to the United States? What is the outlook for the economic health of the nation? Type a Word document incorporating the leading economic indicators and the information Ms. Jones is interested in.

With reference to source 1, 3, 4 and your understanding of the historical context, how valuable are these sources to a historian studying the extent of economic recovery in Germany by 1928?

If they are right, what are the implications for unemployment? What kind of unemployment would be affected?

The unemployment rate in the United States has improved dramatically over the last two years, from a high of 8.3% in July 2012, to a low of 6.6% in January 2014. In October of 2012, the civilian labor force increased from 578,000 to 155.6 million, labor force participation increased up to 63.8%, and total employment overall rose by 410,000! Since then, the unemployment rate has been falling at a stable rate due to a political push from Washington DC and new employment initiatives. The inflation rate over the last 2 years has been relatively stably, with a few major increases and decreases in 2012 and 2013. It reached a high of 2.3% in June of 2012, and reached a low of 1.0% at the end of 2013. The federal interest rate has remained at a constant .25% over the past few years.

The debate about the relationship between inflation and unemployment is mainly based on the famous “Phillips Curve”. This curve was first discovered by a New Zealand born economist called Allan William Phillips. In 1958, A. W. Phillips published an article “The relationship between unemployment and the rate of change of money wages in the United Kingdom, 1861-1957”, in which he showed a negative correlation between inflation and unemployment (Phillips 1958). When the unemployment rate is low, the inflation rate tends to be high, and when unemployment is high, the inflation rate tends to be low, even to be negative.

Monetary policy effects the GDP inflation. “Between 1996 and 2000, real GDP in the United States expanded briskly and the price level rose only slowly. The economy experienced neither significant unemployment nor inflation. Some observes felt that the United States had entered a “new ear” in which business cycle was dead. But that wishful thinking came to an end in March 2001, when the economy entered its ninth recession since 1950. Since 1970, real GDP has declined in the United States in five periods: 1973-1975, 1980, 1981-1982, 1990-1991 and

Disadvantages of inflation include high inflation rates that can cause hesitation and mistakes leading to less investment. It is discussed that countries with higher inflation, have lower rates of investment and economic growth. The higher the inflation the lower world-wide competitiveness. Another disadvantage is menu costs and the costs of changing price lists, stabile wage growth and declining incomes. Most importantly it can dcreas the real value of savings, which may affect older people who live on savings. However, it does depend on whether interest rates are higher than the inflation rate.

In the 70’s Friedman developed his theory of inflation on the correlation of inflation and unemployment on the basis of a critical analysis of the (Keynesian) Phillip’s curve. The key elements in the examination of the mutual links between the inflation process and the situation in the labor market are in his construct a natural rate of unemployment, (adaptive) expectations of inflation, as well as a

Discuss the role of government policy in reducing unemployment and inflation. In your discussion make use of the diagrammatic representation of the macroeconomy developed in lectures in Term 2