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Which problem is greater: inflation or unemployment?

Which problem is greater: inflation or unemployment?. What is inflation?. Inflation-sustained general rise in prices. Measures of inflation. Types of inflation. Creeping inflation-prices rise few percent every year Hyper-inflation- large increases in price each year.

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Which problem is greater: inflation or unemployment?

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  1. Which problem is greater: inflation or unemployment?

  2. What is inflation? • Inflation-sustained general rise in prices

  3. Measures of inflation

  4. Types of inflation • Creeping inflation-prices rise few percent every year • Hyper-inflation- large increases in price each year

  5. Inflation rate formula Price index for year t Price index for previous year

  6. Causes of inflation:

  7. Examples of inflation:Germany 1921-1923 • Was caused by the war. • 7 000 000 000 000% in 1923 • Other countries that suffered inflation at that time-Austria, Hungary, Poland, USSR

  8. Serbia and Montenegro 1993-1995 • Yugoslavia broke. Government printed money. • Unemployment rose to 30% • New currency “Dinar” was created. • Inflation 5 000000000000000%(quadrillion) • 12 Nov. 93 1 Deutsch mark=1million new dinars • 15 Dec.93 1DM=3.7 billion new dinars • End of December 1DM=3 trillion new dinars. • New new dinar created • Novi dinar eliminated inflation

  9. Zimbabwe 2004-2008

  10. Unemployment • Unemployed-those of working age who are without work, but who are available for work at current wage rates • Labour force-those who are employed and unemployed. • UK government definition: Unemployed-people of working age who are without work, available to start working within 2 weeks and actively seeking employment, or waiting to take up an appointment

  11. Feb 2013 European Unemployment Data, courtesy of Eurostat

  12. Types of unemployment • Voluntary and Involuntary • Frictional Unemployment • Cyclical Unemployment • Structural Unemployment • Seasonal Unemployment

  13. Costs of unemployment • To employee-loss of earnings • Lack of money cause problems in families • Government gets less taxes (VAT) • Firms lose profits • Workers lose additional wages(higher output) • General increase of violence and crime

  14. Unemployment

  15. USA inflation and unemployment rates during the 1960s

  16. Summary: • Inflation and unemployment are essential for economy • Depending on inflation, unemployment changes. • Inflation is more crucial to control.

  17. Sources • http://index.minfin.com.ua/index/infl/ • http://www.inflation.eu/inflation-rates/china/historic-inflation/cpi-inflation-china.aspx • Sloman,J. Economics Pearson 2012 8th edition • Anderton A. Economics Causeway press 2007, 4th edition

  18. Thank You!

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