The recovery phase of the inflation-unemployment cycle emerges if

Question

Quizplus · Accepted Answer

The recovery phase of the inflation-unemployment cycle emerges if policymakers respond to a recessionary gap by increasing aggregate demand. This can be done through monetary or fiscal policy measures, such as lowering interest rates, increasing government spending or cutting taxes, to stimulate economic growth and reduce unemployment. Flexible prices and wages may also be helpful, but they are not the key factor driving the recovery phase. Nominal wages and prices rising or higher resource prices may actually hinder the recovery by leading to cost-push inflation and reducing consumer purchasing power.

The Recovery Phase of the Inflation-Unemployment Cycle Emerges If