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Commercial Bank vs. Central Bank

Question

Discuss whether it is always possible for a country to have low unemployment and low inflation at the same time.

Category:

Unemployment

Frequently asked question

Preview Answer

I. 🍃Introduction
- Brief explanation of the topic
- Importance of understanding the relationship between unemployment and inflation

II. Reasons why low unemployment may not lead to low inflation
- High incomes and total demand causing demand-pull inflation
- Increased competition for labor leading to higher wages and cost-push inflation
- Price/wage spiral causing demand-pull inflation to lead to cost-push inflation

III. Reasons why low unemployment may lead to low inflation
- Total supply increasing as total demand increases, leading to high output and low unemployment without inflation
- Advances in technology and improvements in education raising productivity and lowering costs of production, reducing cost-push inflation and increasing demand for labor
- Low inflation stimulating firms to raise output and take on more workers

IV. 👉Conclusion
- Summary of the main points
- Importance of considering both sides of the argument when analyzing the relationship between unemployment and inflation.

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