Question

Explain why government policies are designed to influence arrogate demand would require policymakers to choose between...

Explain why government policies are designed to influence arrogate demand would require policymakers to choose between inflation and unemployment.

Homework Answers

Answer #1

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.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Explain one of the reasons why policymakers usually focus on demand-side policies to achieve their macroeconomic...
Explain one of the reasons why policymakers usually focus on demand-side policies to achieve their macroeconomic goals as opposed to the supply-side ones. Provide one example of a demand-side policy and explain why and how it causes the aggregate demand to shift. Similarly, for the supply side, you need to explain one of the reasons why some may prefer to use supply-side policies. Provide one example of a supply-side policy and explain why and how it causes the aggregate supply...
Suppose that the governor of Georgia wishes to pass fiscal policies that would have an immediate...
Suppose that the governor of Georgia wishes to pass fiscal policies that would have an immediate impact on the state’s economy, and hence improve his chances of reelection. What type of policies would the governor be inclined to support and why? What happens if the government wants to lower the unemployment rate in our economy, like we are experiencing right now, how will this affect the inflation rate as well? Can the government influence both of the variables (inflation/unemployment rate)...
Unemployment and Inflation Two of the biggest issues in macroeconomics are inflation and unemployment. Policymakers would...
Unemployment and Inflation Two of the biggest issues in macroeconomics are inflation and unemployment. Policymakers would like to keep both of these measures low. Often, however, there is a tradeoff between the two. A strong economy that lowers unemployment can put upward pressure on prices. A weak economy that lowers inflation can increase unemployment. We currently have the benefit of both very low unemployment and inflation. But things could change and it’s good to have policy plans in place before...
1. Examine the effects of government policies in the light of the demand supply framework. 2....
1. Examine the effects of government policies in the light of the demand supply framework. 2. Explain the meaning of the elasticity of demand and supply and apply the concept of elasticity to real-world problems. 3. Describe the concepts of consumer surplus and producer surplus and apply the concepts to study the efficiency of the market and the inefficiency of government taxation. 4. Define price floor and price ceiling in economics. 5. Use the model of demand and supply to...
Which would have a larger influence on aggregate demand- increase in government spending or decrease in...
Which would have a larger influence on aggregate demand- increase in government spending or decrease in taxes? Why is this?
Explain graphically the policies to deal with demand-pull inflation.
Explain graphically the policies to deal with demand-pull inflation.
Questions about government policies a) what are the definitions of two government policies that alter the...
Questions about government policies a) what are the definitions of two government policies that alter the price market outcome in chapter 6. b) Using the supply-demand diagram model to do analysis about price control. c) Explain tax on buyers and tax on sellers. What is the difference between two cases and what is wedge driven by tax, please using the graph to see how the tax affect the market outcome.
Why would the British government (or any government) choose to issue perpetuities (consols) over other debt...
Why would the British government (or any government) choose to issue perpetuities (consols) over other debt instruments? Also, from an investor's perspective, why would someone choose to purchase a perpetuity (consol)?
1. Choose a representative country, identify and describe a demand or supply shock. Examine its effect...
1. Choose a representative country, identify and describe a demand or supply shock. Examine its effect using the AD/AS curves on Inflation, unemployment and Output. Using data, examine the relationship between unemployment and Inflation due to the shock.
Explain how an increase in government expenditure designed to increase aggregate demand can increase potential GDP...
Explain how an increase in government expenditure designed to increase aggregate demand can increase potential GDP and aggregate supply. In your own words please.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT