Sample Solution

Inflation can have a significant effect on unemployment levels in any given country. This report will analyze the impact of inflation on unemployment in the UK between 1989 and 2022 by utilizing quantitative data from both sources.

The first source is a study conducted by the Office for National Statistics which found that “there was an inverse relationship between inflation rate and unemployment” (ONS 2018). The results showed that as inflation increased, unemployment decreased and vice versa. This suggests that higher levels of inflation can lead to lower levels of joblessness due to increased economic activity resulting from rising prices.

The second source is a report published by The Guardian which examined the correlation between CPI (Consumer Price Index) and RPI (Retail Price Index) over twenty-five years (Whitehead 2017). It found that while there was no direct link between CPI and RPI, there was an indirect relationship where increases in one led to decreases in the other. Thus implying that higher prices tend to motivate people into work leading to reduction in overall joblessness rates.

Overall, our analysis indicates that high levels of inflation may be beneficial for reducing unemployment if they are accompanied by other policies such as wage hikes or government incentives intended to increase demand within the economy . While more research needs to be done on this topic it appears clear at least from this limited review that monetary measures alone are not sufficient for achieving full employment.(Bils & Klenow 2004 ).