If Policymakers Expand Aggregate Demand, What Happens to Inflation and Unemployment

question 39

Multiple Choice

If policymakers expand aggregate demand, what happens to inflation and unemployment?

• A) Inflation falls but unemployment rises.
• B) Inflation and unemployment fall.
• C) Inflation and unemployment rise.
• D) Inflation rises but unemployment falls.

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Definitions:

Political Bias

A preference or inclination that influences judgment or decision-making, favoring or disfavoring certain political parties or ideologies.

Public Bureaucracies

Organizations within the public sector governed by a fixed set of rules and structured hierarchically, tasked with implementing government policies.

Public Choice Theorists

Economists and political scientists who study how public decisions are made, applying theories and methods of economics to analyze political behavior and decision-making.

Market System Failure

An economic situation where the allocation of goods and services by a free market is not efficient, often justifying government intervention.