Reducing aggregate demand to fight inflation will cause higher unemployment.

Question

Quizplus · Accepted Answer

When aggregate demand is reduced, it leads to lower spending by consumers and businesses, which in turn reduces demand for goods and services. This can lead to a decrease in production and ultimately result in higher unemployment, as businesses may need to lay off workers due to the decrease in demand. Therefore, reducing aggregate demand to fight inflation can cause higher unemployment.

Reducing Aggregate Demand to Fight Inflation Will Cause Higher Unemployment