The cost of reducing unemployment more rapidly by expansionary fiscal and monetary policies is a permanently higher inflation rate.

Question

Quizplus · Accepted Answer

Expansionary fiscal and monetary policies, such as increasing government spending and lowering interest rates, can boost aggregate demand and reduce unemployment in the short term. However, if these policies are maintained for too long, they can create excess demand and lead to higher inflation rates. This inflation can become ingrained in the economy, resulting in a permanently higher inflation rate.

The Cost of Reducing Unemployment More Rapidly by Expansionary Fiscal