Re: Lower unemployment rate= higher inflation
Supply and Demand. When employment is near max, employees can ask and get wage hikes. Labor is a huge cost factored into prices of everything. That's an inflationary effect.
Add to this monetary inflation (money supply growth). When workers sense that prices are going higher for basic food/clothing/shelter/insurance/higher ed, etc, thay ask for and demand more wages. That's an inflationary effect.
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