What's worse: unemployment or inflation?

This chapter reviewed the costs of unemployment and inflation. Clearly, the preferred policy goal is lower unemployment and lower inflation. But sometimes policymakers need to make choices. Make certain that you have identified:

All the costs of unemployment. They are:

All the costs of inflation. They are:

Which is worse:

• a 1 percent increase in the unemployment rate, or
• a 1 percent increase in the inflation rate.

Weigh the costs of each: which is more harmful?