The only policy lever that is effective against unemployment when the AS curve is vertical is
A)Fiscal policy.
B)Monetary policy.
C)Supply-side policy.
D)Laissez faire policy.

Question

Quizplus · Accepted Answer

When the Aggregate Supply (AS) curve is vertical, it indicates that the economy is at full capacity or full employment. In such a scenario, traditional demand-side policies like fiscal and monetary policy are ineffective in reducing unemployment further because increasing demand would only lead to inflation rather than increased output. Supply-side policies, however, aim to increase the productive capacity of the economy by improving efficiency, productivity, and encouraging investment, which can help reduce structural unemployment even when the economy is at full capacity.

The Only Policy Lever That Is Effective Against Unemployment When