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.
Question
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.
Solution
High unemployment is undesirable primarily because it results in a loss of output. This is option A.
Here's why:
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When there is high unemployment, it means that a large number of people who could be working (and therefore producing goods or services) are not. This is a loss of potential output for the economy.
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This loss of output can lead to a decrease in the Gross Domestic Product (GDP) of a country. GDP is a measure of the value of all goods and services produced in a country in a certain period. A decrease in GDP means the economy is not performing at its full potential.
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High unemployment also means less income for individuals, which can lead to lower consumer spending. Consumer spending is a major component of GDP, so this can further decrease economic output.
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Finally, high unemployment can lead to social and economic problems, such as poverty and inequality.
Options B and C are not always true. High unemployment does not always lead to increased inflation or interest rates. In fact, it can often lead to the opposite.
Option D is incorrect because high unemployment does not reduce idle resources. Instead, it represents a situation where resources (in this case, labor) are idle.
Similar Questions
Which one of the following is most likely to cause increased unemployment in an economy?A A decrease in the economy’s central bank interest rate.B An increase in the economy’s money supply.C A competitive devaluation of the economy’s currency.D An increase in protectionism by the economy’s trade partners.
3.Which of these are very bad for the economy as it will negatively impact the investments and production and thereby increase unemployment? A. Inflation B. Deflation C. Stagflation D. Bank Rate
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.
8. If the central bank pursues a monetary policy that is more expansionary than what firms and people expect, then the central bank must be trying to A) boost output in the short run. B) constrain output in the short run. C) constrain prices. D) boost prices in the short run. 9. High unemployment is undesirable because it A) results in a loss of output. B) always increases inflation. C) always increases interest rates. D) reduces idle resources. 10. Supply-side economic policies seek to A) raise interest rates through contractionary monetary policy. B) increase federal government expenditures. C) increase consumption expenditures by increasing taxes. D) increase saving and investment using tax incentives.
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.
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