Unemployment Rate and Inflation

Unemployment Rate and Inflation

Academic LevelUniversitySources3
Number of Pages6 page(s) / 1650 WordsReferencing StyleMLA
SpacingDouble SpacedDeadline2020-08-08 22:00:00
Order Instructions
The underdeveloped country is Central African Republic and the developed one is Norway.

The purpose of this paper is to use the two indicators to compare the economic performance of two countries; one developed and the other underdeveloped. The countries selected for the analysis are Norway and the Central African Republic (CAR). Data on inflation and unemployment rates were collected between the periods 2000 and 2012 for each country and presented in an excel sheet. A line chart of the data to present a longitudinal trend was then developed for each set of data. Phillip’s curve was then created to establish the relationship between the unemployment rate and the inflation rate for each of the countries.

Macroeconomic indicators are essential in performing fundamental analysis that would reveal a country’s economic state, which enables the ability to assess and boost current and future economic and financial health.

Philip’s curve postulates an inverse and stable relationship between unemployment and inflation in an economy. Assume the case of an economy in an equilibrium position, with inflation at X and the unemployment at Y.  Due to the concern over unemployment, governments usually seek to stimulate the aggregate demand through fiscal or monetary stimulus packages.

Efforts to address unemployment are responsible for 32.81% inflation in CAR, while in Norway, these account for 1.12%. The correlation is much more significant in CAR compared to Norway. The overall rate of unemployment for the period under consideration (2012) is higher in CAR compared to Norway.

The governments need to adopt expansionary fiscal policy approaches to stimulate economic growth in the countries. Increased expenditure in the economy through initiatives such as infrastructure projects help to inject money into the economy and create jobs (Palley 45). There can be a possible multiplier effect in which there will be further spending on the economy, and these could increase aggregate demand.


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