Final answer:
Economic stability refers to maintaining low and constant rates of inflation and unemployment, ensuring a balanced economy. An inflation rate of 1-2% and an unemployment rate of 5% or less are goals for good economic health. Proper balance during different economic cycles contributes to overall stability.
Step-by-step explanation:
Economic stability is a situation in which the economy experiences constant and low rates of inflation and unemployment. An inflation rate of 1-2% is considered a major goal for economic well-being as it indicates that the overall level of prices for goods and services is not rising too quickly, which can otherwise lead to a decline in the standard of living. Similarly, a measured unemployment rate of 5% or less is deemed low (good) as it signifies that a substantial number of people in the labor force are employed, and the economy is not wasting its labor resources.
During times of recession or depression, such as the Great Depression or the Great Recession of 2008-2009, high levels of unemployment are typical, and the demand for goods decreases, leading to lower inflation rates. Conversely, during periods of strong economic growth, there is often a decrease in unemployment but an increase in the rate of inflation. Ensuring economic stability involves maintaining a balance between these two major factors to support a flourishing and stable economy.