In the Short Run, Fiscal and Monetary Policy Cause Unemployment

question 86

Multiple Choice

In the short run, fiscal and monetary policy cause unemployment and inflation to move in opposite directions because

• A)the Fed and Congress rarely agree on policy.
• B)one controls aggregate demand, the other controls aggregate supply.
• C)both policies control only aggregate supply.
• D)both policies control only aggregate demand.

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Definitions:

Marginal Benefit

The additional satisfaction or utility gained from consuming or producing one more unit of a good or service.

Marginal Cost

The cost of producing one additional unit of a product or service, which varies depending on the level of production.

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Total Costs

The sum of all costs associated with the production of a good or service, including both fixed and variable costs.