Question

When unexpected inflation is zero, the corresponding unemployment rate is the _____ unemployment rate. A. minimum...

When unexpected inflation is zero, the corresponding unemployment rate is the _____ unemployment rate.

A. minimum

B. zero

C. maximum

D. equilibrium

How is monetary policy different from fiscal policy?

A. Monetary policy adjusts interest rates, whereas fiscal policy adjusts government spending and taxes.

B. Monetary policy focuses on correcting inflation, whereas fiscal policy focuses on unemployment.

C. There is no difference between the two policies.

D. Monetary policy is determined by the president, whereas fiscal policy is determined by the chair of the Federal Reserve.

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Homework Answers

Answer #1

Ans 1. C) maximum

When thwre is zero inflation the economy might be slipping into deflation. Decrease in pricing means less production and wages will fall, which in turn causes prices to fall further causing further decreases in wages, and so on. This increases the unemployment rate.

Ans 2. A) Monetary policy adjusts interest rates, whereas fiscal policy adjusts government spending and taxes.

The Fed actively adjusts the buying and selling of bonds to achieve the target interest rate. Fiscal policy refers to the government's decision about taxation and government spending.

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