So....what's the REAL deal with the situation?

Society faces a short-run trade off between inflation and unemployment.

Economists, policy-makers, corporation officials, government officials etc. have been trying to find the solution to this dilemma, but what now?

Conclusive idea of principle 10:

1. Government releases or prints more money to instigate people to spend money. (De-regulate economy)
2. People spend more money, and the general economy becomes more healthy. Hence, the unemployment rate reduces down.
3. Government's decision to print more money acts as the root cause of inflation, the lowering of value of currency. 
4. Inflation causes the economy to stagnate.

In essence, the ultimate question comes down to choosing the less dire situation: inflation (which causes far worse damage than simple unemployment) followed by immediate benefits from temporary economic boost from deregulation of money OR no governmental interaction or no inspiration of people to spend more money. 

There is no explicit answer to this question; the answer depends on the situation. 

Employment/Unemployment how it effects inflation and deflation

The employment will go up as the government prints more money for the society. For example, the customers will buy more products and the markets will see more profit. This will cause the market to employ more workers. That will increase the profit until the space for employers is full. From then the efficiency will drop causing the company to pay more money than what it makes. This will end up making products stacked up and no one to offer it. And this short cycle will go on and on again.  

Inflation's basic concepts

The basic concept of Inflation

The Philips Curve

The Philips Curve

In discussing the matters of inflation and unemployment, the graph that economists and policy-makers most utilize is perhaps the Philips curve. In our principle, which particularly deals with the relationship between inflation and unemployment, the Philips curve can provide integral information regarding what kind of short-run trade offs the policy-makers and economists face. 

Unemployment and Inflation Rise in Euro Zone

Unemployment in the euro zone has risen to its highest level since the introduction of the common currency even as inflation climbed, economic reports showed Thursday, underscoring the challenge facing European finance officials as they met in Brussels.

To read more...Click: http://nyti.ms/GUWXgn

In China, Inflation Eases as Growth Slows

The Chinese government announced on Friday a significant drop in inflation, which gives leaders more leeway in managing the economy and continuing with a policy of loosening lending or cutting interest rates to help sustain economic growth...

To Read more... Click: http://nyti.ms/GYFNCb

Principle 10: Around the World

Principle 10: Society faces a short run tradeoff between inflation and unemployment

In the short run, an increase in the quantity of money stimulates spending, which raises both prices and production. The increase in production requires more hiring, which reduces unemployment. Thus, in the short run, an increase in inflation tends to reduce unemployment, causing a trade-off between inflation and unemployment. The trade-off is temporary but can last for a year or two. Understanding this trade-off is important for understanding the fluctuations in economic activity known as the business cycle. In the short run, policy makers may be able to affect the mix of inflation and unemployment by changing government spending, taxes, and the quantity of money.

Although a higher level of prices is, in the long run, the primary effect of increasing the quantity of money, the short-run story is more complex and controversial. Most economists describe the short-run effects of monetary injections as follows:

•        Increasing the amount of money in the economy stimulates the overall level of spending and thus the demand for goods and services.

•        Higher demand may over time cause firms to raise their prices, but in the meantime, it also encourages them to hire more workers and produce a larger quantity of goods and services.

•        More hiring means lower unemployment.

This line of reasoning leads to one final economy-wide trade-off: a short-run tradeoff between inflation and unemployment. Although some economists still question these ideas, most accept that society faces a short-run trade-off between inflation and unemployment. This simply means that, over a period of a year or two, many economic policies push inflation and unemployment in opposite directions. Policymakers face this trade-off regardless of whether inflation and unemployment both start out at high levels (as they were in the early 1980s), at low levels (as they were in the late 1990s), or someplace in between. This short-run trade-off plays a key role in the analysis of the business cycle—the irregular and largely unpredictable fluctuations in economic activity, as measured by the production of goods and services or the number of people employed. All such subject and varied topics are covered in Accounting Homework help, Assignment help at Transtutors.com.

Society Faces a Short-Run Trade Off between Inflation and Unemployment

The tenth economic principle suggested by Mankiw is "Society Faces a Short-Run Trade Off between Inflation and Unemployment." Now, what does this really mean? What trade off?

In the society that we live in, we continuously purchase goods, and behind all purchase exists the demand for each goods. The need and demand for such goods acts as the determinant of inflation, and it is the policy-makers' and economists' role to set up a bound for inflation so that the inflation rate of 2-4% is maintained.

Additionally, not all people have the equal purchasing powers as others do, and not everyone is employed as others are. In the perspective of an economist or a policy-maker, the lower the unemployment rate, the better, and people have been single-handedly working on abating the degree of unemployment to facilitate the general welfare of the country.

In the perspective of a policy-maker, simply printing more money so the general economy of a nation is facilitated would be a wonderful option; people, then, would be encouraged to spend more and as the people spend more, the companies and manufacturers would be inspired to produce more. This means there is less economic regulation put, and unemployment rate would be reduced. Essentially, the general economy is risen. However, because more money has been printed, the inflation rate would go up, risking the economy in its entirety.

This dilemma of choosing to either enhance the state of inflation or unemployment - thus facing a trade off - has been a continuous problem for policy-makers and economists for a long time. Here in this blog, we will be discussing further on this dilemma and real examples regarding the principle.