- Unemployment, inflation and the Balance of payments
o Unemployment rates have both efficiency and distributional dimensions.
The economically efficient unemployment rate therefore may be larger than zero to accommodate the movement of labor among jobs.
The efficient rate may not be consistent with distributional objectives
o Rate of Inflation
Consumer Price Index (CPI) – how much it cost in current dollars to buy a fixed basket of market goods relative to its cost in some base year - is commonly used to measure inflation rates
Zero rate of inflation is not necessarily desirable
CPI may overstate the rate of inflation