Inflation and Unemployment

In the following paper, we are going to assess inflation and unemployment with the Internet article, People Prefer Inflation to Prospect of Job Loss. Justin Wolfers, an assistant professor of political economy at the Stanford Graduate School of Business, is the author of this article. In this analysis of the article, we are going to provide definitions of inflation and unemployment. Then, we are going to consider the economic impact of the main points in the article on the economy and society’s feelings toward unemployment.

In order to provide a clear understanding of our article, we are going to define the terms inflation and unemployment. According to David Colander, inflation is “a continual rise in the price level” (Macroeconomics, p. 148). This reflects how much the prices in an economy have risen over time. The increase of prices of goods over time is the price index; therefore, the price index is a measurement of time compared to the yearly measurement of inflation. To calculate inflation, we are using the price index for a year’s time. Currently, economists are using the year of 1984 as a base, and inflation represents this increment over a period. The next term we are defining is unemployment. According to the William King on-line dictionary, unemployment refers to the condition of being with out a job or to the proportion of people who can and will work but are unemployed (William King, 2003).

With the definitions of inflation and unemployment, we are now going to assess the economic impact of the main points in the article on the economy and society’s feelings toward unemployment. The economic impact of unemployment is the possibility of recession. According to Justin Wolfers, “Recessions really hurt, and the governments and their central banks need to be aware of the importance of avoiding them” (pg. 1, 2003). When unemployment rates are at its highest rate since August 1994, the results are alarming to the economy. In the U.S. economy, there is a total work force of 145,801,000, and there are 136,783,000 people currently employed. This means that there is an unemployment rate of 6.2% (Labor Force Data, 2003). This unemployment rate affects not only the unemployed people, but also employed people. The employed people start to feel as though they can loose their job at anytime. With this job uncertainty people feel, people would rather save money than spend money, which creates financial insecurity that has a negative effect on the economy.
Now that we have determined the effects on the economy, we need to consider the effects on people’s sense of satisfaction. Justin Wolfers has done research on how the effects of inflation and unemployment affect people’s satisfaction. Justin Wolfers gathered data on life satisfaction compared to the rates of inflation and unemployment from different European countries and the Unites States from 1973 through 1998. This research shows us that people feel more stress when they cannot find a job than when prices are rising. From the information contained in the survey, the research shows that rising joblessness is roughly five times more troubling to people than rising prices. High unemployment rate in a region, according to Wolfers, “lowers average feelings of usefulness, confidence, and happiness and raises depression and feelings of worthlessness”(pg. 1, 2003). People also feel a loss of faith in the government, corporate sectors, and banking sectors, which can lead to a recession (Wolfers, 2003).

In conclusion, we have assessed inflation and unemployment with the Internet article, People Prefer Inflation to Prospect of Job Loss by Justin Wolfers. We provided definitions of inflation and unemployment to help explain the content of the article. Inflation is a continual rise in the price level, which took the price index’s measurement of time over a year to calculate inflation. Finally, we considered the economic impact of the main points in the article on the economy and society’s feeling toward unemployment. The financial insecurity has had a negative effect on the economy because of job uncertainties. Since people were saving their money, the prices did not increase keeping inflation from increasing. The research showed that people felt more stressed when they could not find a job than when prices were rising. People felt a felt less useful, confidence, and happiness and there was a raise in depression and feelings of worthlessness.

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