If the government raises the growth of nominal GDP in response to a supply shock,
A)inflation will decelerate and unemployment will fall.
B)inflation will accelerate and unemployment will worsen.
C)employment can be maintained so long as expectations are unaffected by the supply shock.
D)None of these results follow an increase in the growth of nominal GDP.

Question

Quizplus · Accepted Answer

Increasing nominal GDP growth can help maintain employment if expectations remain stable, as it can offset the negative effects of a supply shock without worsening inflation.

If the Government Raises the Growth of Nominal GDP in Response