Asked by Miguel Avalos on Jul 15, 2024
Verified
The experience of the 1970s and 1980s suggests that the cost of engaging in the process of disinflation is that
A) exports must increase.
B) deflation must occur.
C) nominal interest rates will be expected to increase.
D) unemployment will most likely increase.
Disinflation
A decrease in the rate of inflation, indicating a slowdown in the rate at which prices for goods and services are rising.
Nominal Interest Rates
The reported percentage rate without adjusting for the inflation rate, reflecting the cost of borrowing money.
Unemployment
The situation where individuals who are able and willing to work are unable to find a job, expressed as a percentage of the labor force.
- Comprehend the principle of disinflation and its impact on economic conditions.
Verified Answer
RS
Rajinder SinghJul 19, 2024
Final Answer :
D
Explanation :
The process of disinflation, which involves reducing the rate of inflation, often leads to higher unemployment rates. This is because as policies are implemented to reduce inflation, such as higher interest rates to curb spending, economic activity can slow down, leading to job losses.
Learning Objectives
- Comprehend the principle of disinflation and its impact on economic conditions.