An 'economic contraction' can cause the unemployment rate to ________ and the inflation rate to ________.
A)fall or rise; rise
B)rise; fall or rise
C)fall; rise
D)fall; fall

Question

Quizplus · Accepted Answer

An economic contraction (recession) usually causes a rise in unemployment as companies lay off workers due to reduced demand for goods and services. At the same time, the inflation rate may fall (due to reduced demand for goods and services) or rise (due to supply-side shocks such as higher energy prices caused by reduced supply). However, historically, recessions tend to result in lower inflation rates. Therefore, option B is the best answer.

An 'Economic Contraction' Can Cause the Unemployment Rate to ________