Explain why government policies are designed to influence arrogate demand would require policymakers to choose between inflation and unemployment.
Policy makers always face a trade off between inflation and unemployment when they design policies that influence aggregate demand. This is because a when aggregate demand is stimulated there is an increase in the rate of inflation and a decrease in the rate of unemployment. When it is discouraged, there is a decline in the rate of interest and an increase in the rate of unemployment. This trade-off is also experienced under the Phillips curve and this is the reason why an economy that chooses a lower rate of inflation must bear then increased rate of unemployment and vice versa.
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