According to economists, there can be no trade-off between inflation and unemployment in the long run. Graphically, this means the Phillips curve is vertical at the natural rate of unemployment, or the hypothetical unemployment rate if aggregate production is in the long-run level.
What happens to unemployment if money supply increases?
A money supply increase will raise the price level more and national output less the lower the unemployment rate of labor and capital is. If a money supply increase drives an economy below the natural rate of unemployment, price level increases will tend to be large while output increases will tend to be small.
Is controlling inflation more important than unemployment?
Originally Answered: Is inflation more important than unemployment? No. Unemployment causes personal crises, and reduces the nation’s real wealth. That is a real loss all around.
