In the United States economy, the unemployment rate is 4.7% and inflation is 1.1% as of may this year. By the end of the year 2015, the inflation rate was 0.7 % while the unemployment rate was 5.3 % (Federal Reserve Bank of St. Louis). This clearly shows that the inflation rate increased while the unemployment rate declined.

This suggests that the government had adapted a monetary policy this year. Monetary policy involves the control of money supply in the economy. In this case, there is increase supply of money otherwise known as monetary expansion in the economy as explained by the increase in inflation rate. This is done by lowering the interest rates so that companies and individuals can be able to borrow from financial institutions. This will in turn boost economic activity and lower unemployment rates since companies can now be able to employ people. The government can also use an expansionary fiscal policy which involves tax cuts and increased government spending. This will increase the money supply and thus increasing aggregate demand in the economy. This will definitely increase the inflation rate and reduce the unemployment rate.

From the statistics above, the U.S. government must have initiated an expansionary policy which has increases inflation but has reduced unemployment. However, the inflation rate is still in an understandable level but the unemployment rate is still high. Given a chance, I would increase expand the expansionary monetary and fiscal policies to help lower the unemployment rate up to a level of inflation that is not harmful to the economy. Sometimes the economy has to forego the cost of increased inflation to curb the problem of unemployment.

Reference

Federal Reserve Bank of St. Louis. (n.d.). Federal Reserve Economic Data – FRED – St. Louis Fed. Retrieved June 15, 2016, from https://research.stlouisfed.org/fred2/

 
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