The Relationship Between Inflation And Unemployment

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As the population ages, the inflation is less alternative to unemployment. In an aging society, the tolerance of inflation is at a lowland, the trade-off between inflation and unemployment changes in times, this will lead to a serious problem between inflation and unemployment which affects the choice made by central bank. For monetary policy, the relationship between inflation and unemployment has always been a bone of contention. The movements in population structure caused by labor supply, capital stock and the change of risk and return preference will whether affect the relationship between inflation and unemployment or lead to changes in macroeconomic policy trade-off balance. All of these are based on the long-term population structure …show more content…
According to Statistics Canada, there is a total of fifteen percent of people who are about to retire in the next 10 years. With the retirements of these baby boomers in Canada, the decreasing labour force may cause the reduction in technology development resulting in a negative productivity. Labor shortages will take a more serious issue in restricting Canadian’s economic development. “with the exit of workers from the labour force, it is extremely difficult to meet high rates of gross domestic product growth.” Based on Robert’s opinion, we can assume pessimistically that aging in the society causes an increase in unemployment. In general, older workers have less productivity than younger workers. And when the percentage of aged workers is higher than younger workers, it will directly affect the gross domestic …show more content…
Young people have more human capital and their income is higher. In the long run, income and inflation have a positive relationship between each other. The elderly relying more on pension funds or savings for living, but the standard pension payment adjustment is usually lag, or we can even say it is sticky. “If society is putting a higher % of income into pension funds, it could reduce the amount of savings available for more productive investment, leading to lower rates of economic growth.” As it mentioned in the quote, old people 's ability to cope with inflation is relatively weak than younger people’s ability. For young people, they feel more employment pressure. Because of their high income level, they resist inflation pressure well, but they are more sensitive to unemployment. The bigger the elderly population proportion is, the bigger the slope of the Phillips curve is. Considering the shape of the curve, the slope of it is usually negative, so as the elderly population proportion grows higher, the Phillips curve becomes smoother. This means that, as the population ages, the social tolerance of

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