Samuelson and Solow argued that when unemployment is high,
A)aggregate demand is high,which puts upward pressure on wages and prices.
B)aggregate demand is high,which puts downward pressure on wages and prices.
C)aggregate demand is low,which puts upward pressure on wages and prices.
D)aggregate demand is low,which puts downward pressure on wages and prices.

Question

Quizplus · Accepted Answer

According to Samuelson and Solow, when unemployment is high, aggregate demand is low. This is because high unemployment means there are fewer people with income to spend, which results in decreased demand for goods and services in the economy. As a result, there is downward pressure on wages and prices, as producers reduce prices to try and stimulate demand and workers accept lower wages in order to remain employed. Therefore, the correct answer is D.

Samuelson and Solow Argued That When Unemployment Is High