If the unemployment rate falls below its long-run level, which policies would be appropriate to stabilize output? a. increase th

Question

3 years ago

10

If the unemployment rate falls below its long-run level, which policies would be appropriate to stabilize output? a. increase th

e money supply, increase taxes b. increase the money supply, cut taxes c. decrease the money supply, increase taxes d. decrease the money supply, cut taxes

Business

1 answer:

olganol [36] · Answer 1 · 2022-03-06T02:45:11+03:00

Answer:

c. decrease the money supply, increase taxes

Explanation:

Unemployment rate lower than the natural rate of unemployment (long run unemployment), creates inflationary gap in the economy. It requires policies to be contractionary in nature. Hence, money supply should decrease and tax should increase to correct the economy.