Question

Today we see a very low unemployment rate with a controlled and acceptable inflation rate. Which of the following statements could be a reason for inflation being low during this expansion?

A. All of these 3 other possible answers that are listed here are true reasons.
B. The contractionary policy that the Fed has followed this year.
C. The public's view of the the Fed's credibility has increased.
D. Last year's tax cuts.

Answer 1

A. All of these 3 other possible answers that are listed here are true reasons.

Step-by-step explanation:

Inflation caused by economic growth. Typically, higher inflation is caused by strong economic growth. If Aggregate Demand (AD) in an economy expands faster than aggregate supply, we would expect to see a higher inflation rate. ... This fall in unemployment puts upward pressure on wages which leads to higher inflation.

between rates of inflation and rates of unemployment. If unemployment is high, inflation will be low; if unemployment is low, inflation will be high. The Phillips curve and aggregate demand share similar components.

Answer 2

A. All of these 3 other possible answers that are listed here are true reasons.

Step-by-step explanation:

If we are to use wage the rate of change in wages or inflation, as a proxy for inflation in the economy, when there is unemployment, the number of persons searching for work is significantly greater than the number of jobs available for the people who are unemployed. What we mean is, the supply of labor is greater than the demand for it.

With the availability of many workers, there's little need for employers to "bid" for the services of employees by paying them good wages.