Business, 04.06.2021 18:20 patriots2833

Suppose the government misjudges the natural rate of unemployment to be much lower than it actually is, and thus undertakes expansionary fiscal and monetary policies to lower it. a. These policies might at first succeed because multiple choice 1 in the long run, as aggregate demand increases, unemployment is reduced. in the long run, as aggregate demand decreases, unemployment is reduced. in the short run, as aggregate demand increases, unemployment is reduced. in the short run, this action will decrease aggregate demand and unemployment. b. These policies might at first succeed, but eventually multiple choice 2 in the long run, as aggregate demand increases, the aggregate supply curve will shift right, reducing unemployment and returning the economy to full employment. in the short run, as aggregate demand increases and unemployment is reduced, workers will demand higher wages, the aggregate demand curve will shift left, and the economy will return to the natural rate of unemployment. in the short run, this action will decrease aggregate demand, lower unemployment, and return the economy to full employment. in the long run, as aggregate demand increases and unemployment is reduced, workers will demand higher wages, the aggregate supply curve will shift left, and the economy will return to the natural rate of unemployment.

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Suppose the government misjudges the natural rate of unemployment to be much lower than it actually...