Question

What would happen if the unemployment rate was 0%? What would happen if the inflation rate was 0%? Describe which rates would be more beneficial for the economy and why.

Answer 1

Unemployment rate and inflation rate are inversely correlated. If the unemployment rate was 0%, inflation would continuously increase. If the inflation rate was at 0%, unemployment would continuously increase. Low unemployment with stable inflation is better than low inflation with a high unemployment rate. Controlling and keeping inflation in check is very important, losing control over inflation has bad effects.

Answer 2

A jobless rate of 0% could raise inflationary pressure

Step-by-step explanation:

Inflation and the rate of unemployment are inversely correlated.

The argument is this: High salary inflation is sometimes regarded as proxy for the real inflation level.

High unemployment could mean that labor demand is lower compared to supply (employee availability). In addition, this may reduce the pay, as people are prepared to be hired for lower salaries. Conversely, if the workplace unemployment rate is small, more (and more than adequate) positions are available than the number of employees. To retain the small working population, employers may need to increase wages, which in turn increases wage inflation.