When an Economy Is in a Deflationary Spiral, and Nominal

question 34

Multiple Choice

When an economy is in a deflationary spiral, and nominal interest rates are close to zero, it may be necessary:

• A) for the Fed to print money.
• B) to raise taxes.
• C) to cut unemployment insurance.
• D) to lay off government workers.
• E) to conduct contractionary monetary policy.

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Definitions:

Loose Labor Market

A situation in the job market where the supply of workers exceeds the demand for labor, often leading to higher unemployment rates and lower wages.

Economic Strike

A work stoppage by employees to pressure their employer to meet their demands regarding wages, benefits, and working conditions.

Conditions of Employment

The terms, circumstances, and environment under which an employee works, including hours, salary, benefits, and workplace policies.

Cooling Off Period

A mandatory time frame designed to prevent immediate industrial action after a union vote, giving negotiations a chance to resume without disruption.