t en 1 For a cause o mewernent song \"as curve C) Demand D) Al of the above are
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t en 1 For a cause o mewernent song "as curve C) Demand D) Al of the above are true solo policies w Unemployment Rate (%) the following best describes a 2 Refer to the above diagram for a specific economy Which of decision by policymakers that moves this economy from point a to point b? A) Policymakers have instituted an expansionary monetary policy and/or a budgetary to reduce the rate of inflation deficit, thereby accepting more u Policymakers have instituted a restrictive monetary policy and/or a budgetary B) surplus, thereby accepting a higher rate of inflation to reduce unemployment C) have instituted an expansionary monetary y and/or a budgetary deficit ther eby accepting a higher rate of inflation to reduce unemployment Policymakers have instituted a restrictive monetary policy and/or a budgetary surplus, thereby accepting more unemployment to reduce the rate of inflation. D) 3. A decrease in the inflation rate is likely to be associated with A) An increase in the unemployment rate. Decreased unemployment benefits C) A decrease in the unemployment rate D) Less unemployment benefits being paid. B) 4. Which of the following causes a decrease in unemployment and inflation at the same time? A) A rightward shift in the aggregate supply curve. B) Wage increases equal productivity increases, which reduces inflation. C) A rightward shift in the aggregate demand curve. D) All of the above.Explanation / Answer
2] C – we can see from the diagram that the movement from point a to b shows the increase in inflation rate along with the reduction in umemployment rate. This shows that the govt has followed an expansionary monetary policy or budget deficit increasing its expenditure, thus increasing the money flow in market and increasing demand thus increase in productivity and employment.
3] A – For a reduction in inflation rate, the demand in market will reduce hence the productivity will decrease and supply will decrease. Therefore the firm owners will employ less workers or curb down the existing employees thus increasing uemployment.
4] A – By rightward shifting the aggregate supply curve, taking price i.e inflation in the Y axis and output in the X axis, the price will fall and the output will increase, hence employment will also increase leading to reduction in unemployment.
1] C – Demand side policy will cause a movement along the curve, it will increase the inflation rate but aswell as reduce the unemployment rate, like we can say movement from point b to point a.
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