In the short run, efforts to reduce the unemployment rate are likely to cause
A)a decrease in the inflation rate.
B)an increase in the inflation rate.
C)no change in the inflation rate.
D)Uncertain-economists have found no relationship between the two variables.

Question

Quizplus · Accepted Answer

When efforts are made to reduce unemployment, additional demand is created in the economy. This increase in demand can lead to an increase in prices, causing inflation to rise. Therefore, reducing unemployment in the short run, can cause an increase in the inflation rate.

In the Short Run, Efforts to Reduce the Unemployment Rate