The main problem of a government constantly using monetary policy to reduce unemployment, as guided by the Phillips curve is: (a) people eventually update their expectations, shifting the Phillips curve to the right, worsening the inflation-unemployment trade-off (b) people increase their demand for money very fast, rendering monetary policy more difficult (c) eventually hitting the zero lower bound, where monetary policy is not effective anymore (d) being exposed to a negative supply shock (e) none of the above is a problem

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A: ANSWER STEP-1   Ans :- A The loss increases if Philips curve gets steeper or inelastic.

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