Discuss the Effects of a Surprise Inflation Reduction Policy on Unemployment

question 42

Essay

Discuss the effects of a surprise inflation reduction policy on unemployment in the short run.If the reduction in inflation is permanent, what happens in the long run?

---

Definitions:

Fiscal Policy

Policy made by the government which entails modifying how much it spends and adjusts tax rates to control and affect the economic health of a nation.

Rational Expectations School

An economic theory suggesting individuals make predictions about future economic events using all available information and past experiences.

Inflation

The speed at which the general cost level for goods and services ascends, weakening purchase potency.

Policy Change

Adjustments or modifications made to existing rules, regulations, or guidelines within an organization, government, or system.