why does low unemployment cause inflation?
In: 6
ELI5 is “Too much money chasing too few goods.”
The “too much money” part comes from just about everyone having a job, and therefore money to spend i.e. demand is high.
The “too few goods” part comes from businesses having trouble expanding because there are not enough people looking for work i.e. supply is constrained.
High demand plus constrained supply equals rising prices i.e. inflation.
In the real world, the situation is far more complicated. But you asked for ELI5, so… 🤷♂️
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