The Relationship Between Inflation and Unemployment in the Economy--Animal Spirits Revisited

In their book, Animal Spirits: How Human Psychology Drives the Economy and Why it Matters for Global Capitalism, George Akerlof and Robert Shiller show the relationship between inflation and unemployment.  As we move into this second decade of the new millennium, unemployment in the USA is still at 10%.  Inflation is relatively low (no social security increase for cost of living for 2010).  According to the book, zero inflation leads to an increase in unemployment.  When the economy works toward full employment, a nominal amount of inflation--with effective limits and safeguards set by the government--can be expected.