question archive If an economy is already experiencing in?ation, efforts to reduce unemployment by stimulating aggregate demand are most likely to cause: a
If an economy is already experiencing in?ation, efforts to reduce unemployment by stimulating aggregate demand are most likely to cause: a
Subject:EconomicsPrice:9.82 Bought3
If an economy is already experiencing in?ation, efforts to reduce unemployment by stimulating aggregate demand are most likely to cause: a. the unemployment rate to rise in the short run b. the inflation rate to accelerate c. a decline in the price level, coupled with a sharp increase in unemployment d. real income to expand, but money income is likely to remain unchanged
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Step-by-step explanation
b
The economy's inflation rate is already high which means that the amount of money in circulation. To increase aggregate demand, there has to be the employment of expansionary measures e.g increasing government spending. This will further result in a much more Increase in the money in the economy. The currency will lose its value and prices will continue increasing resulting to an increase in unemployment.
