If Government Fiscal Policy Is Used to Restrain Cost-Push Inflation

question 57

Multiple Choice

If government fiscal policy is used to restrain cost-push inflation, we can expect:

• A)the unemployment rate to rise.
• B)the unemployment rate to fall.
• C)the aggregate demand curve to shift rightward.
• D)tax-rate declines and increases in government spending.

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Definitions:

Derived Demand

The demand for a good or service that arises from the demand for another good or service; for example, the demand for steel is derived from the demand for automobiles.

Wage Rate

The amount of money a worker is paid per unit of time, such as an hour or a month.

Marginal Physical Product

The additional output resulting from one more unit of a specific input, assuming all other inputs remain constant.

Marginal Revenue Product

Marginal revenue product measures the additional revenue generated by employing one more unit of input, commonly used to analyze labor and capital contributions.