Using the St. Louis Federal Reserve – Fred website: http://research.stlouisfed.o
ID: 1217588 • Letter: U
Question
- Using the St. Louis Federal Reserve – Fred website: http://research.stlouisfed.org/fred2/search
- Look up current economic indicators for GDP, Inflation, U and Economic Growth . Put the last 3 years in an excel spreadsheet and graph each overtime in a separate graph. Compare the relationship between them. More specifically, once you are at the website, I want you to use the following for prices, (the change in CPI is the inflation rate) unemployment and GDP.
- CPI - Consumer Price Index For All Urban Consumers: All Items, SA – seasonally adjusted – (Prices)
- U - Civilian Unemployment Rate (Unemployment)
- GDP - Real Gross Domestic Product, 3 Decimal (GDP)
- Change in Real Gross Domestic Product, (Economic Growth)
- Using the St. Louis Federal Reserve – Fred website: http://research.stlouisfed.org/fred2/search
- Look up current economic indicators for GDP, Inflation, U and Economic Growth . Put the last 3 years in an excel spreadsheet and graph each overtime in a separate graph. Compare the relationship between them. More specifically, once you are at the website, I want you to use the following for prices, (the change in CPI is the inflation rate) unemployment and GDP.
- CPI - Consumer Price Index For All Urban Consumers: All Items, SA – seasonally adjusted – (Prices)
- U - Civilian Unemployment Rate (Unemployment)
- GDP - Real Gross Domestic Product, 3 Decimal (GDP)
- Change in Real Gross Domestic Product, (Economic Growth)
- Using the St. Louis Federal Reserve – Fred website: http://research.stlouisfed.org/fred2/search
- Look up current economic indicators for GDP, Inflation, U and Economic Growth . Put the last 3 years in an excel spreadsheet and graph each overtime in a separate graph. Compare the relationship between them. More specifically, once you are at the website, I want you to use the following for prices, (the change in CPI is the inflation rate) unemployment and GDP.
- CPI - Consumer Price Index For All Urban Consumers: All Items, SA – seasonally adjusted – (Prices)
- U - Civilian Unemployment Rate (Unemployment)
- GDP - Real Gross Domestic Product, 3 Decimal (GDP)
- Change in Real Gross Domestic Product, (Economic Growth)
Explanation / Answer
The inflation and unemployment are inversely related to each other. This implies fall in unemployment rate causes increment in inflation rate. High rate of unemployment makes difficult for labor to negotiate for higher wages. Candidates accept jobs at lower wages. Moreover, this decrements economic output. As a result, companies have inventory in surplus due to the increase in volume of goods unsold. During recession, lower output causes fall in demand pulling inflation in the economy.
On the contrary, low rate of unemployment increments economic output. As a result, wage rate increments and consumers purchasing power increments as they have more money to spend. With this, there is rise in demand for goods & services which eventually causes rise in price of goods & services. This causes rise in inflation as well as in GDP level as GDP is affected by the demand and supply law.
In other words, we can say that GDP and unemployment rate is inversely related to each other. Increase in unemployment causes a decline in economic output. Rise in GDP level and low rate of unemployment causes economy to boom on a macro level. This implies that there is rise in economic growth causing consumer's purchasing power to increment which finally causes rise in demand for goods & services. In order to meet the increased demand, companies hire more employees and workers which causes a downfall to the unemployment rate.
In a nutshell, we can say that GDP level, Inflation rate and unemployment rate are correlated and connected to each other. They are interdependent on each other.
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