Question 3 2.5 pts The Economy in 2008 In the first half of June 2008 the effect

Question

Question 3 2.5 pts The Economy in 2008 In the first half of June 2008 the effects of a housing and financial crisis were impacting the economy. Reduced housing prices reduced household wealth. If the government did not intervene, then the long run effects of the housing and financial crises (compared to before the crisis) would O raise both inflation and the unemployment rate. O reduce both the inflation rate and the unemployment rate. lower the inflation rate, but the unemployment rate would be unchanged. lower the unemployment rate,but the inflation rate would be unchanged.

Explanation / Answer

a> raise both inflation and unemployment

Reason

If no measure is taken by the government, the inflation rate and the unemployment rate will both rise. This is an example of stagflation which occurs during a recession.

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