Policy makers can become concerned if the unemployment rate is too low because:Question 18Select one:a.output will decrease.b.employment will fall.c.stock prices will fall.d.inflation might increase.e.an exchange rate crisis might occur.
Question
Policy makers can become concerned if the unemployment rate is too low because:Question 18Select one:a.output will decrease.b.employment will fall.c.stock prices will fall.d.inflation might increase.e.an exchange rate crisis might occur.
Solution
The correct answer is d. Inflation might increase.
Here's why:
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When unemployment is too low, it means that almost everyone who wants to work is employed.
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This situation can lead to a shortage of workers.
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Companies may have to increase wages to attract new employees or retain existing ones.
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Higher wages can lead to increased costs for businesses.
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Businesses may pass on these increased costs to consumers by raising the prices of goods and services.
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When the prices of goods and services increase, it leads to inflation.
So, policy makers might be concerned about low unemployment because it could potentially lead to inflation.
Similar Questions
Suppose policy makers underestimate the natural rate of unemployment. In situations like these, policy makers will likely implement policies that result inSelect one:A.a higher inflation rate than necessary.B.an unemployment rate that is "too high."C.overly contractionary monetary and fiscal policy.D.a steadily decreasing inflation rate.E.more unemployment than necessary.
High unemployment is undesirable because itA) results in a loss of output.B) always increases inflation.C) always increases interest rates.D) reduces idle resources.
Which situation or event will cause a decrease in the wage rate and greater employment?YOUR ANSWERYour AnswerA slump in economic activity.The consumer demand for goods and services increases.A lower retirement age.A lower school leaving age.
A rising unemployment rate affects a society by:A.reducing the value of a country's currency.B.making it harder for citizens to find jobs.C.discouraging businesses from investing.D.causing inflation rates to rise rapidly.
When the unemployment rate is above the natural rate of unemployment, the inflation rate typically decreases. When the unemployment rate is below the natural rate of unemployment, the inflation rate typically increases.Group of answer choicesBoth statements are trueThe first statement is true, the second is falseThe first statement is false, the second is trueBoth statements are false
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