After an oil price shock,which of the following would move unemployment back towards its natural rate?
A)the Fed sells bonds
B)the government raises taxes
C)the government increases expenditures
D)All of the above are correct.

Question

Quizplus · Accepted Answer

An oil price shock would likely hurt employment because it increases the cost of production for firms, which means they may cut back on hiring or lay off workers. To counteract this, the government could increase spending to stimulate demand and create jobs. Selling bonds (A) would likely have the opposite effect, as it would reduce the money supply and hurt the economy. Raising taxes (B) would also likely hurt employment, as it reduces disposable income and spending. Therefore, choice C (the government increasing expenditures) is the best option for moving unemployment back towards its natural rate.

After an Oil Price Shock,which of the Following Would Move