How can an economy achieve full employment without igniting inflation?
What will be an ideal response?
An increase in aggregate demand will help an economy achieve full employment, but it also has the effect of increasing the price level and contributing to inflation. That inflation effect can be mitigated by an increase in aggregate supply that tends to dampen the rising inflation. The U.S. economy experienced such conditions from 1996 to 2000.
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If the current unemployment rate is 5%, under which of the following circumstances would you expect the Fed to use contractionary monetary policy?
A) if the inflation rate is above 5% B) if the inflation rate is below 5% C) if the natural rate of unemployment is below 5% D) if the natural rate of unemployment is above 5%
Firms A and B are identical, produce identical products, and are the only firms in a market. Firm A's output is higher than Firm B's. This means that Firm B is the
A) Cartel leader. B) Stackelberg leader. C) Stackelberg follower. D) Cournot leader.