In the medium run, a price increase combined with a decrease in the unemployment rate is most likely the result of
A)an adverse supply shock
B)an adverse supply shock followed by restrictive monetary policy
C)a favorable supply shock
D)a decrease in money supply
E)expansionary fiscal or monetary policy

Question

Quizplus · Accepted Answer

Expansionary fiscal or monetary policy can lead to a price increase (inflation) due to higher demand in the economy. At the same time, it can reduce unemployment by stimulating economic activity, which increases the demand for labor.

In the Medium Run, a Price Increase Combined with a Decrease