The Relationship Between Inflation And Unemployment On Growth

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1.1 Background of the Study
Three ultimate macroeconomic goals which every government strives to achieve in order to ensure sound macroeconomic policy are maintenance of relative stability in domestic prices, attainment of a high rate of employment or full employment and achievement of a high rapid and sustainable economic growth. The relationship between inflation and unemployment on growth remains a controversial one in both theory and empirical findings. Originating from the Latin American context in the 1950s, the issue has generated an enduring debate between structuralists and monetarists. The structuralists believe that inflation is essential for economic growth, whereas the monetarists see inflation as detrimental to economic progress. There are two aspects to this debate:
(a) The nature of the relationship if one exists and
(b) The direction of causality.
Friedman (1973) succinctly summarized the inconclusive nature of the relationship between inflation and unemployment on economic growth as follows: ―historically, all possible combinations have occurred: inflation and unemployment with and without development, no inflation and unemployment with and without development. The main problems facing the economy of Iraq today are unemployment and inflation. These problems are persistently complex and cause economic and social dilemma to the economy as a whole. The inability of government to provide a lasting solution to these twin challenges has contributed
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