Reference no: EM131348337

If I were the macroeconomic policy maker I would try to balance the short-run tradeoff between inflation and unemployment rate by doing a few things. First I would focus on maintaining and enforcing rules and regulations that help encourage competition and a fair playing fields for everyone. I don't believe that I would focus on either or as far as the unemployment rate and inflation, because they both relate to one another. I believe that letting them both sort themselves out naturally would be the best thing to do.

The historical relationship between rates of unemployment and inflation in the U.S. economy is that the trade-off between inflation and unemployment was discovered by A. W. Phillips in 1958 and has been named the Phillips curve. It was used in the US in 1958 during the recession and inflation periods.  The US unemployment rate fell to 4.6 percent in November 2016 from 4.9 percent in the previous month and well below market expectations of 4.9 percent. Monthly inflation rate in the United States was 0.12% in October 2016. Which is 0.12 less than what it was in September 2016 and 0.17 more than in October 2015. At the same time, 2016 year to date inflation rate is 2.20% and year over year inflation rate is 1.64%. This means that we are stable but could definitely make some improvements.