Practice Quiz

Financial Planner

Category - General Principles of Financial Planning

Start a Study Session Sign up for Question of the Day
Economists postulate that there is a relationship between inflation and unemployment within societies. They state that when the real GDP of a country is high, actual unemployment rate falls below its natural level. What effect does this have on inflation?
  1. it accelerates inflation
  2. it decelerates inflation
  3. it has an insignificant effect on inflation
  4. it depends on the GDP
Explanation
Answer: A - High real GDP leads to actual employment rates to fall and inflation to accelerate.
Key Takeaway: When the real GDP of a country is high (an indication of high economic activity), the actual unemployment rate falls below its natural level. This often leads to an acceleration of inflation due to a number of factors such as an artificial hike in wages.
Was this helpful? Upvote!
Login to contribute your own answer or details
Start a Study Session Sign up for Question of the Day

Top questions

Related questions

Most popular on PracticeQuiz