Thanks for your question, Denise.

The answer is not as simple as it used to be. For many years the popular theory has been there is a tradeoff between inflation and unemployment.

Inflation is basically too much money chasing too few goods, so prices continually escalate. The popular theory has been that the money supply impacts economic growth and easier money (lower interest rates) stimulates the economy, and increases employment (thereby lowering unemployment). Tighter fiscal policy restricts the economy, reducing employment and increasing unemployment. This monetarist policy has guided the Federal Reserve in trying to navigate the knife edge of economic growth without inflation for the past several decades.

Recent studies dispute the tradeoff effect in the long run, but allow for short-term impact of tightening and easing money supplies. This has brought about renewed calls for returning to the gold standard which would virtually eliminate inflation and eliminate the monetarist approach to economic governence. How then to avoid the cycles of economic growth and recession? It seems that the more we know the more we don't know.

I hope this helps. Let us know if you need anything else.