Tuesday, April 3, 2012

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. 

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