using the rate of inflation to make a decision 1

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Using the Rate of Inflation to Make a Decision”

In Chapter 4 of The Little Book of Economics, Ip talks about the natural rate of unemployment as the rate of unemployment that will not lead to an acceleration in inflation. Keep this reading in mind as you respond to this week’s discussion questions.

  • Think about this: If the current unemployment rate is 3.9%, would one expect the rate of inflation to increase or decrease? Explain your answer.
  • Now you face a wonderful decision. Imagine that you just won a lottery jackpot of $100,000. If you expect inflation to accelerate, should you buy that home you’ve been thinking of now? What would you decide if the rate of inflation is negative?