Thank you!!
I also had a question about unemployment and inflation - does a rising inflation rate lead to lower or higher unemployment and why?
I've heard different answers from people so I wanted to clarify.
The answers you have gotten have probably confused you a little bit - both are correct to some extent however I'll try and put it in the simplest explanation.
Possibly the best way to do is break this up into short and long term impacts.
If unemployment is below the Non-accelerating inflation rate of unemployment (NAIRU) this will increase inflation. Because of economic growth, firms aren't looking for more firms new workers to enter the workforce. As such, they pay increased wages to those already in the workforce to attract the best existing labour. This therefore increases inflation. In the same way, if the government wanted to try and increase employment via macroeconomic policy, this would be successful in the short term at reducing unemployment, but over the long term wage increases won't keep up with inflation and as a result, firms will be forced to sack some of their workforce, which increases unemployment. Unemployment will return back to NAIRU.
So easiest way to remember it: growth and unemployment are interdependent on each other. An increase in growth will (generally) increase employment. Once it does this and firms are forced to compete for the best workers and thus increase their wages, this creates inflation.
However over the long term, this growth in wages cannot keep up with the wage of inflation, which increases firm costs because employees will want wages to keep going up. Forces firms to fire staff- therefore increasing unemployment.
I hope that answer was comprehensive and makes sense