If consumption expenditures fall,then in the short run
A)inflation and unemployment rise.
B)inflation rises and unemployment falls.
C)inflation falls and unemployment rises.
D)inflation and unemployment fall.

Question

Quizplus · Accepted Answer

When consumption expenditures fall, it means that people are spending less on goods and services. As a result, firms will have less revenue, and may cut back on production and employment. This will lead to a decrease in aggregate demand and output, resulting in lower inflation, but higher unemployment. Therefore, Option C (inflation falls and unemployment rises) is the best choice.

If Consumption Expenditures Fall,then in the Short Run