The Reserve Bank Responds to an Increase in Unemployment Caused

question 89

Multiple Choice

The Reserve Bank responds to an increase in unemployment caused by a decrease in the AS curve by lowering interest rates.This will i.shift the aggregate demand curve rightward and raise the price level.
Ii) shift the aggregate demand curve rightward and the aggregate supply curve leftward,raising prices.
Iii) result in lower employment and a higher price level.

• A)i and ii
• B)ii and iii
• C)iii only
• D)i only
• E)i and iii

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Definitions:

Federal Unemployment Tax

A federal levy paid by employers to fund the unemployment account of the federal government, used to pay unemployment benefits to workers who have lost jobs.

State Unemployment Tax

A tax imposed by state governments on employers to fund unemployment insurance benefits for workers who have lost their jobs.

Social Security Tax

Taxes collected to fund the Social Security program, providing benefits for retirees, the disabled, and survivors of deceased workers.

Medicare Tax

A federal tax that funds Medicare, a healthcare program for individuals over 65 and some younger people with disabilities; deducted from employee wages with a matching amount paid by employers.