If inflation and unemployment both rise, why is this a complex situation in macroeconomic study?
Answer and explanation
Correct answer: Because both price stability and employment policy goals are affected
Rising inflation reduces purchasing power and threatens price stability, while rising unemployment indicates underused labour and lost income. These problems may require policies that involve difficult trade-offs, because measures that restrain inflation can weaken demand, while measures that stimulate employment may increase price pressure. Hence the situation is macroeconomically complex.
Frequently asked questions
What is the correct answer to this question?
Because both price stability and employment policy goals are affected
Why is this the correct answer?
Rising inflation reduces purchasing power and threatens price stability, while rising unemployment indicates underused labour and lost income. These problems may require policies that involve difficult trade-offs, because measures that restrain inflation can weaken demand, while measures that stimulate employment may increase price pressure. Hence the situation is macroeconomically complex.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates. Topic: GDP and Welfare.
