Is there an inverse relationship between inflation and unemployment ( Essay

Is there an inverse relationship between inflation and unemployment ( Phillips Curve). Do unemployment rates give a realistic picture of differences in economic activity in Britain and Europe - Essay Example From the Philips curve therefore it is apparent that inflation and unemployment share an inverse relationship where inflation rises with the reduction of unemployment and vice versa (Gordon 2011). From the diagram, when the unemployment rate is 4% the inflation rate is 7% and when the unemployment rate is 6% the inflation rate is 3%. The diagram clearly shows that when the rate of unemployment is higher (6%) the rate of inflation is lower (3%) that when the unemployment rate low (4%) which results in a higher inflation rate (7%). Unemployment rates provide a realistic picture of the differences in economic activity in Britain and Europe. The difference between the economic activities in Britain and Europe can be attributed to the rates of unemployment. The unemployment rates in Britain are lower that the unemployment rate in Europe and the rate of economic activity in Britain are higher than that in Europe. The high number of employed individual’s in Britain economy increases the overall spending in the economy and subsequently the general economic activity of the country is increased. Reduction of the rates of unemployment increase expenditure within an economy and results in improved economic activities (Jovanovic & Jovanović