In the short run, a lower unemployment rate may be achieved at the cost of a higher inflation rate.

Question

Quizplus · Accepted Answer

When the unemployment rate is low, it means that demand for labor is high and employers are competing for workers. This can lead to higher wages and increased spending, which can push up prices and contribute to inflation. Therefore, in the short run, lowering unemployment may result in higher inflation.

In the Short Run, a Lower Unemployment Rate May Be