When inflation and unemployment are both higher than desired, most economists believe that the government should:
A)adopt contractionary monetary policies that reduce both inflation and unemployment.
B)adopt expansionary fiscal policies that reduce both inflation and unemployment.
C)determine whether reducing inflation is more or less important than reducing unemployment and adopt a policy that targets the more important goal.
D)not act as it is impossible to reduce either inflation or unemployment under these circumstances.

Question

Quizplus · Accepted Answer

When facing a situation where both inflation and unemployment are higher than desired, economists generally recommend prioritizing one issue over the other due to the trade-off between inflation and unemployment often depicted in the Phillips curve. This means the government should decide whether it is more crucial to reduce inflation or unemployment and then adopt policies specifically aimed at the more pressing issue. Expansionary policies can lower unemployment but may increase inflation, while contractionary policies can reduce inflation but may increase unemployment.

When Inflation and Unemployment Are Both Higher Than Desired, Most