One determinant of the long-run average unemployment rate is the
A)market power of unions, while the inflation rate depends primarily upon government spending.
B)minimum wage, while the inflation rate depends primarily upon the money supply growth rate.
C)rate of growth of the money supply, while the inflation rate depends primarily upon the market power of unions.
D)existence of efficiency wages, while the inflation rate depends primarily upon the extent to which firms are competitive.

Question

Quizplus · Accepted Answer

The long-run average unemployment rate can be influenced by factors such as the minimum wage, which can affect the cost of labor and thus hiring practices. The inflation rate, on the other hand, is primarily influenced by the growth rate of the money supply, as per the quantity theory of money, which posits that the amount of money in circulation is a key driver of inflation.

One Determinant of the Long-Run Average Unemployment Rate Is the