Suppose that, in an attempt to combat severe unemployment, the government decides to increase the amount of money in circulation in the economy. This monetary policy action   demand for goods and services in the economy, leading to  prices for products. In the short run, the change in prices induces firms to produce  goods and services. This, in turn, leads to a  unemployment level.   Based on this analysis, the economy faces the following trade-off between inflation and unemployment: Higher inflation leads to  unemployment.

In the year 2020, aggregate demand and aggregate supply in the fictional country of Drooble are represented by the curves AD2020 and AS on the following graph. The price level is 102. The graph also shows two possible outcomes for 2021. The first potential aggregate demand curve is given by the ADA curve, resulting in the outcome illustrated by point A. The second potential aggregate demand curve is given by the ADB curve, resulting in the outcome illustrated by point B. PRICE LEVEL 108 107 B 106 105 104 103 AD 2020 102 101 100 0 2 4 6 8 A 10 OUTPUT (Trillions of dollars) AS AD A ADB 12 14 16 ? Suppose the unemployment rate is 5% under one of these two outcomes and 2% under the other. Based on the previous graph, you would expect to be associated with the higher unemployment rate (5%). If aggregate demand is low in 2021, and the economy is at outcome A, the inflation rate between 2020 and 2021 is

When full employment is present in the United States: approximately 95 percent of the labor force will be employed. the rate of unemployment will fall to zero. the actual rate of unemployment will be less than the natural rate of unemployment. approximately 95 percent of the adult population will be employed.

Answer the given question with a proper explanation and step-by-step solution.