Define trade-off between inflation and unemployment

Reference no: EM131774104

Question: Suppose that the government believes the economy is not producing goods and services at its optimal level. In an attempt to stimulate the economy, the government increases the quantity of money in the economy by printing more money.

This monetary policy ______ the economy's demand for goods and services, leading to ________ product prices. In the short run, the change in prices induces firms to produce ________ goods and services. This in turn, leads to a _________ level of unemployment.

In other words, the economy faces a trade-off between inflation and unemployment: Higher inflation leads to ________ unemployment.

Reference no: EM131774104

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