The problems of aggregate inflation and unemployment are
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If there is an increase in aggregate demand, such as what is experienced during demand-pull inflation, there will be an upward movement along the Phillips curve. As aggregate demand increases, real GDP and price level increase, which lowers the unemployment rate and increases inflation.
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The ‘problems of aggregate inflation’ and unemployment are major topics of macroeconomics.
Explanation:
- When there is a rise in inflation the prices increase and if the prices increase the workers would demand higher wages.
- This is will lead to a fall in employment leading to a decline in the unemployment rate.
- High inflation is never good for an economy since it reduces the value of money.
- It brings down the demand of goods while the aggregate supply remains the same. This slows down the economic growth of the region.
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