Question

A simultaneous increase in both unemployment and inflation is most likely to be the result of a(n): Group of answer choices decrease in the aggregate demand. increase in short-run aggregate supply. simultaneous outward shift of the aggregate demand and supply curves. decrease in the short-run aggregate supply. increase in long-run aggregate supply.

Answer 1

Answer: Decrease in the short run aggregate supply. increase in long run aggregate supply

Explanation:

assuming the wage stays constant in the short run (price of labour), an increase inflation/general prices will lead to a decrease in the Supply of labour because the current wage is no longer enough to cover the same number of goods people used to buy which will then increase Unemployment. The Labor market will experience a situation where inflation and unemployment are increasing at the same time

The Supply of Labour will increase in the Long run because the wage price will have sufficient time to adjust and increase to a new equilibrium level. .an increase in wage price will increase the quantity of supplied.