The relationship between inflation and unemployment is often referred to as the Phillips Curve.
The unemployment rate and the rate of inflation have an inverse connection, as seen by the Phillips Curve.
This implies that inflation rises as unemployment falls and declines as unemployment rises.
It is assumed that the supply of labor and the demand for products and services have a set connection, which is the basis for this relationship.
When the economy is operating at full employment, where the unemployment rate is at its natural rate
any increase in demand for goods and services will lead to an increase in prices, as there is a limited supply of labor.
On the other hand, during periods of high unemployment, businesses may not have to raise wages to attract workers, which can help to keep prices low.
However, the Phillips Curve relationship is not always consistent, and there have been instances where both inflation and unemployment have been high simultaneously.