Which of the following affect the values of inflation and unemployment?
I. changes in government spending
II. expectations about the price level
III. changes in nominal wages
IV. changes in money supply
A) I and IV only
B) I, II, and IV only
C) II and III only
D) I, II, III, and IV

Question

Quizplus · Accepted Answer

All four factors listed can affect the values of inflation and unemployment. Changes in government spending and money supply can directly affect the overall level of demand in the economy and thus impact inflation and unemployment. Expectations about the price level and changes in nominal wages, which are both related to inflation, can also affect the behavior of consumers and firms and lead to changes in the level of inflation and unemployment.

Which of the Following Affect the Values of Inflation and Unemployment