An interesting idea that wasn’t officially introduced in class was the Phillips curve which was mentioned by the Article. Increasing inflation will decrease unemployment, vice versa. Therefore this theory can be favoring inflation. However, the phillip’s curve has been criticized for being too simplistic, it’s vulnerable in explaining stagflations, such as the relationship between inflation and unemployment from 1970 to 1984.
However, regardless this relationship is fully valid or not, still applies and therefore some politician does utilize the idea from the phillip’s curve to deduce whether unemployment or inflation is more important.
In a way inflation can also be considered, as a good thing to an economy is that it’s less harmful than deflation. Same explanation as the phillip’s curve, decreasing inflation (deflation) means increasing unemployment. Other than that, let’s take an example. At least with inflation, your goods at least seems more attractive to other nations so you can keep your export lines going. Where as deflation your goods seem very expensive, decreasing exports. This is very harmful to countries that rely on exports as their main source of income. Therefore I would say it depends what country is it.
However, sometimes inflation gets out of control. I wasn’t able to understand the article, so I’ll use the example of Weimar Republic’s hyperinflation in the 1920s. With Germany having to pay the reparations of 6.6 billion pounds AND the great depression, the government simply decided to print more money and that resulted in hyperinflation.
I am sure all of you are aware from the broadcast that we listened in class. There are some apparent consequences to hyperinflation. People receive their wages 3 time a day. Why? This is because the money loses its value so quickly that if will become worthless within a second. During winter people had wheelbarrows of money and they would rather burn it instead of using it.
Therefore I hereby conclude that inflation is more healthy than deflation in the modern economy. It is important that we put forward employment rather than the consequences of inflation due to our population growth. There are far more social problems if unemployment continue to rise. So, inflation is more beneficial than harmful in a modern economy.
However, regardless this relationship is fully valid or not, still applies and therefore some politician does utilize the idea from the phillip’s curve to deduce whether unemployment or inflation is more important.
In a way inflation can also be considered, as a good thing to an economy is that it’s less harmful than deflation. Same explanation as the phillip’s curve, decreasing inflation (deflation) means increasing unemployment. Other than that, let’s take an example. At least with inflation, your goods at least seems more attractive to other nations so you can keep your export lines going. Where as deflation your goods seem very expensive, decreasing exports. This is very harmful to countries that rely on exports as their main source of income. Therefore I would say it depends what country is it.
However, sometimes inflation gets out of control. I wasn’t able to understand the article, so I’ll use the example of Weimar Republic’s hyperinflation in the 1920s. With Germany having to pay the reparations of 6.6 billion pounds AND the great depression, the government simply decided to print more money and that resulted in hyperinflation.
I am sure all of you are aware from the broadcast that we listened in class. There are some apparent consequences to hyperinflation. People receive their wages 3 time a day. Why? This is because the money loses its value so quickly that if will become worthless within a second. During winter people had wheelbarrows of money and they would rather burn it instead of using it.
Therefore I hereby conclude that inflation is more healthy than deflation in the modern economy. It is important that we put forward employment rather than the consequences of inflation due to our population growth. There are far more social problems if unemployment continue to rise. So, inflation is more beneficial than harmful in a modern economy.