The government of Econtopia considers two policies to boost the economy. Policy A is to increase the Government Spending that would shift AD right by 500 units. Policy B is to increase the Money Supply would shift AD right by 300 units. According to the Short-Run Phillips Curve, Policy A will lead to a lower unemployment rate and a lower inflation rate than policy B. to a lower unemployment rate and a higher inflation rate than policy B. to a higher unemployment rate and lower inflation rate than policy B. to a higher unemployment rate and higher inflation rate than policy B.

The government of Econtopia considers two policies to boost the economy. Policy A is to increase the Government Spending that would shift AD right by 500 units. Policy B is to increase the Money Supply would shift AD right by 300 units. According to the Short-Run Phillips Curve, Policy A will lead to a lower unemployment rate and a lower inflation rate than policy B. to a lower unemployment rate and a higher inflation rate than policy B. to a higher unemployment rate and lower inflation rate than policy B. to a higher unemployment rate and higher inflation rate than policy B.

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter15: The Debate Over Monetary And Fiscal Policy

Section: Chapter Questions

Problem 5DQ

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