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Inflation and Employment

Inflation can be defined as a sustained rise in the general price level. It has been the experience the world over that a rise in GDP has generally been considered a necessary condition of economic growth. But frequently rising general price level went out of control and reached astonishing limits. The phenomenon of inflation (and its converse deflation) is conventionally analysed in macroeconomics.

Another experience common to most of the economies in the world, developed and developing alike has been that the rate of creation of new job opportunities has lagged behind the demand for jobs. As a result, a part of the economy represents unemployed. This non-utilisation of available resources in the economy represents a deadweight loss. Macroeconomics has been trying to seek a lasting solution to this perennial problem.