Explain how an attempt by the government to lower inflation could cause unemployment to increase in the short-run
To lower inflation, the government may choose to reduce the money supply in the economy. When the money supply is reduced, prices don't adjust immediately. Lower spending, combined with prices that are too high, reduces sales and causes workers to be laid off. Hence, the lower price level is associated with higher unemployment.
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Suppose that when the price of pickles decreases, Teddy increases his purchase of ketchup. To Teddy,
A) pickles and ketchup and substitutes. B) pickles and ketchup are normal goods. C) pickles and ketchup are complements. D) pickles are a normal good and ketchup is an inferior good.
The demand for Exxon gasoline is ____ the demand for all gasoline.
A. exactly as elastic as and has a different slope than B. more elastic than C. less elastic than D. exactly as elastic and has the same slope as
When the actual real GDP exceeds the natural real GDP as in Figure 1-2 above, we expect to find that unemployment is
A) high and inflation is high. B) low and inflation is high. C) low and inflation is low. D) high and inflation is low.
The Social Security tax is a labor tax
a. True b. False Indicate whether the statement is true or false