11.Using AD-AS analysis briefly explain why it is difficult for a government to

Question

11.Using AD-AS analysis briefly explain why it is difficult for a government to reduce the inflation rate and the unemployment rate at the same time. explain how in 50 words

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Explanation / Answer

It is difficult for government to reduce inflation and unemployment rate at the same time because, when unemployment decreases people get jobs and get income, from that they generate demand. This excessive rise in demand causes demand pull inflation.

Also, when government tries to reduce inflation by contractionary fiscal policy, it leads to unemployment.

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