THE EFFECTS OF INFLATION TO THE COUNTRY'S ECONOMY AND THE MAIN WAYS OF DECREASING IT

This article illustrates the meaning of inflation and the impacts to the economy of one country. The inflation and unemployment is connected to each other. A stochastic general equilibrium model is constructed which is capable of examining the covariance properties between inflation and unemployment, both conditioned and unconditioned upon the state of exogenous real and monetary factors. Indivisibilities introduced into agents' labor choice decisions produce unemployment in equilibrium. It is shown that indigenous forces in a competitive economy can result in the traditional negative relationship between inflation and unemployment. The policymaker, while perhaps observing a negatively sloped Phillips curve, actually faces Friedman's positively sloped one. The main ways are given to decline the inflation in this article.