Why, then, is Inflation and Unemployment Linked?

Inflation is often defined by the surplus quantities of money floating around, and is usually coupled with the increase of the said quantities of money. Although the long term effect is primarily the higher level of prices, the short-run effect was broken down effectively in the book Essentials of Economics:


- increasing the amount of money in the economy stimulates the overall level of spending and thus the demand for goods and services.

- higher demand may over time cause firms to raise their prices, but in the meantime, it also encourages them to hire more workers and produces a larger quantity of goods and services.

- more hiring means lower unemployment

So less inflation means greater unemployment!
A notable example of this, the Great Depression, comes to mind.