a) In 2020, the Labor Force Survey measured the economically active population is 40 million, number of employed people is 30 million, and the working age population is 60 million. Calculate the unemployment rate and Labor force participation rate  b) Explain very briefly, what kind of monetary policy tools central bank can use and how they can be used to fight against recession or depression

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Inflation and Purchasing Power Theory

In economic terms, Inflation refers to the increase in the costs of various commodities which are used in daily lifestyle like food, clothes, transport, etc. over a specific time. It may lead to a fall in the purchasing power of the people and also affects the exchange rate of the currency because of the price increase. As the purchasing power falls the unit of the currency in the economy falls. When the prices of the commodities are decreased, then the purchasing power of the consumers will rise, then it will lead to deflation and changes the currency of the base economy to that of the foreign economy which will lead to change in exchange rates.