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When facing supply shocks (oil price rise), the cost of production and prices, output and employment fell. Thus both inflation and unemployment are rising. There is no trade-off between unemployment and inflation - unemployment stagnation period was formed. The government was forced to increase the money supply to keep aggregate demand and unemployment does not decrease not increase, the economy has reached the same but output prices rose at the rate of increase of money. Thus, regulating the economy by monetary policy and fiscal can maintain production to meet supply shocks, but at the expense of inflation growing
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