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Chapter 22 Reflection

Inflation and unemployment have an inverse relationship. You can’t have both become lower at the same time, but policymakers can decide acceptable threshold levels which will then inform which is more of a priority to pursue.

It is good that people work at jobs, because then the GDP rises, which improves the nation’s economy as they become more efficient. But you see, as more people get jobs, their income rises, and then their consumption also increases. Increased consumption means that prices generally rise as the goods go to the highest bidder. Workers in turn will demand higher wages in order to keep up with these rising prices, or inflation. So in the end, as unemployment decreases inflation will increase.

I’m not so sure that there really is a trade-off, as it seems to be more of a feedback cycle rather than something that can be legislated. And this feedback cycle seems to have a historic pattern as well. But overall, neither factor alone totally conveys the quality of life of the citizens.

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