Suppose Americans become concerned about saving for retirement and,as a result,reduce their current consumption expenditures.Which of the following would you expect to occur as a result of this change?
A)In the short run,unemployment will increase and inflation will fall.
B)In the short run,unemployment will increase and inflation will rise.
C)In the short run,unemployment will decrease and inflation will rise.
D)In the short run,unemployment will decrease and inflation will fall.

Question

Suppose Americans become concerned about saving for retirement and,as a result,reduce their current consumption expenditures.Which of the following would you expect to occur as a result of this change?
A)In the short run,unemployment will increase and inflation will fall.
B)​In the short run,unemployment will increase and inflation will rise.
C)​In the short run,unemployment will decrease and inflation will rise.
D)​In the short run,unemployment will decrease and inflation will fall.

Quizplus · Accepted Answer

When consumption expenditures decrease, aggregate demand falls, leading to higher unemployment and lower inflation in the short run.

Suppose Americans Become Concerned About Saving for Retirement And,as a Result,reduce