Charlottesquare wrote:Mike4 wrote:
So turning it around, it looks as though Mr Hunt considers a low unemployment rate to be a cause of high inflation, so measures to raise the unemployment rate are necessary. Is he right? Is it possible to have both inflation at 2% and low unemployment concurrently?
Are there ways available for a government to raise the unemployment rate, other than inducing a recession by increasing borrowing costs to businesses and consumers? Maybe controls of some sort on credit other than making it expensive? We tried that in the 60s IIRC. What happened?
Phillips curve.
https://www.investopedia.com/terms/p/phillipscurve.asp
But as it says this inverse relationship between unemployment rate and inflation was disproved by the stagflation of the 1970s where there were high levels of both unemployment and inflation
Key Takeaways
* The Phillips curve states that inflation and unemployment have an inverse relationship. Higher inflation is associated with lower unemployment and vice versa.
* The Phillips curve was a concept used to guide macroeconomic policy in the 20th century, but was called into question by the stagflation of the 1970s.
*. Understanding the Phillips curve in light of consumer and worker expectations shows that the relationship between inflation and unemployment may not hold in the long run, or even potentially in the short run.