ECONOMICS
FEDERAL RESERVE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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They thought inflation was tolerable
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Because they are bologna
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They were broke and needed an economic trip
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Economists believed that it would pass and all be good
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The government told them this was okay
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Detailed explanation-1: -Inflation has historically had an inverse relationship with unemployment. This means that when inflation rises, unemployment drops. Higher unemployment, on the other hand, equates to lower inflation. When more people are working, they have the power to spend, which leads to an increase in demand.
Detailed explanation-2: -The Phillips Curve is the graphical representation of the short-term relationship between unemployment and inflation within an economy. According to the Phillips Curve, there exists a negative, or inverse, relationship between the unemployment rate and the inflation rate in an economy.
Detailed explanation-3: -Nowadays, modern economists reject the idea of a stable Phillips curve, but they agree that there is a trade-off between inflation and unemployment in the short-run. Given a stationary aggregate supply curve, increases in aggregate demand create increases in real output. As output increases, unemployment decreases.
Detailed explanation-4: -Society faces a short-run tradeoff between unemployment and inflation. If policymakers expand aggregate demand, they can lower unemployment, but only at the cost of higher inflation. If they contract aggregate demand, they can lower inflation, but at the cost of temporarily higher unemployment.