Question

This monetary policy________the economy's demand for goods and services, leading to_________product prices. In the short run, the change in prices induces firms to produce ___________goods and services. This, in turn, leads to a_________ level of unemployment. In other words, the economy faces a trade-off between inflation and unemployment: Higher inflation leads to_________unemployment.

Answer 1

Answer:

Increases,.. higher... more.. low.. lower

Explanation:

This monetary policy acts as economic stimulant by increasing the supply of money in the economy, with increased supply come an increase in the economy's demand for goods and services, leading to higher product prices.

Also, In the short run, this positive change in prices induces firms to produce more goods and services.

This, in turn, leads to a low level of unemployment because companies increase their demand for more labour to meet their demand.

In other words, the economy faces a trade-off between inflation and unemployment: Higher inflation leads to lower unemployment.