If the Fed attempts to reach and maintain very low rates of unemployment,we would expect the rate of inflation to rise.

Question

Quizplus · Accepted Answer

When the Fed attempts to reach and maintain very low rates of unemployment by increasing the money supply, it can lead to an increase in demand for goods and services, which can result in an increase in their prices (i.e., inflation). This is known as the Phillips curve trade-off between inflation and unemployment. Therefore, attempting to keep unemployment very low may lead to a higher rate of inflation.

If the Fed Attempts to Reach and Maintain Very Low