Economists do not advocate a zero unemployment rate. Some unemployment is necessary so that workers may be channeled to their most productive employment as their skills change. Economists use the term natural rate of unemployment to describe the unemployment rate that would exist in the absence of cyclical unemployment. It describes the labor market when the economy is producing what is realistically can produce. Estimates of the natural rate of unemployment vary from 4 percent to around 7 percent.
Inflation is a sustained rise in the average level of prices.
This does not mean that all prices will rise. Some may rise and some may fall, but inflation occurs when the average level of prices rises. Inflation is not a problem if prices and incomes rise at the same rate. But if incomes rise more slowly than prices, households will not be able to buy as many goods and services as they did before. Unanticipated inflation redistributes income away from those who receive fixed incomes toward those who make fixed expenditures.