Question
The below text describes the predicted economic condition in Russia. Stagflation is a condition in which both unemployment & inflation occur at the same time in an economy.
Stagflation may return to Russia this year. Russia’s Central Bank forecasts the inflation rate in Russia to reach as high as 17% later this year. It also forecasts a GDP contraction of between 4.5 and 4.7% this year and between 0.9 and 1.1% next year. Unemployment is expected to rise from 5.2% currently to 6.0% by the end of the year.
Why will it be difficult for the Russian government to decrease both inflation AND unemployment at the same time? Choose the main idea, and the correct monetary AND fiscal policy examples.
a
the government will struggle because the tools needed to do both contradict one another
b
the government will struggle because it is impossible to achieve either of these goals
c
contractionary monetary policy to increase interest rates to slow consumer spending and lower inflation
d
expansionary fiscal policy to decrease interest rates to speed up consumer spending
e
contractionary monetary policy to decrease taxes and increase consumer spending
f
expansionary fiscal policy to decrease taxes and increase consumer spending to increase output and lower unemployment
Stagflation may return to Russia this year. Russia’s Central Bank forecasts the inflation rate in Russia to reach as high as 17% later this year. It also forecasts a GDP contraction of between 4.5 and 4.7% this year and between 0.9 and 1.1% next year. Unemployment is expected to rise from 5.2% currently to 6.0% by the end of the year.
Why will it be difficult for the Russian government to decrease both inflation AND unemployment at the same time? Choose the main idea, and the correct monetary AND fiscal policy examples.
a
the government will struggle because the tools needed to do both contradict one another
b
the government will struggle because it is impossible to achieve either of these goals
c
contractionary monetary policy to increase interest rates to slow consumer spending and lower inflation
d
expansionary fiscal policy to decrease interest rates to speed up consumer spending
e
contractionary monetary policy to decrease taxes and increase consumer spending
f
expansionary fiscal policy to decrease taxes and increase consumer spending to increase output and lower unemployment
Answers
GPT-4o mini
The main idea is:
**a** the government will struggle because the tools needed to do both contradict one another.
The correct monetary and fiscal policy examples supporting this idea are:
**c** contractionary monetary policy to increase interest rates to slow consumer spending and lower inflation.
**f** expansionary fiscal policy to decrease taxes and increase consumer spending to increase output and lower unemployment.
These policies conflict because contractionary policies aimed at reducing inflation can raise unemployment, while expansionary policies aimed at reducing unemployment can exacerbate inflation.
**a** the government will struggle because the tools needed to do both contradict one another.
The correct monetary and fiscal policy examples supporting this idea are:
**c** contractionary monetary policy to increase interest rates to slow consumer spending and lower inflation.
**f** expansionary fiscal policy to decrease taxes and increase consumer spending to increase output and lower unemployment.
These policies conflict because contractionary policies aimed at reducing inflation can raise unemployment, while expansionary policies aimed at reducing unemployment can exacerbate inflation.