Question

Because of the COVID-19 pandemic recession the unemployment rate spiked to more than 15% (the highest level since the Great Depression of the 1930s) and has slowly declined to a 7.9% in September. In response, the Federal Reserve has taken increased the money supply by more than 40% between February and September. This effort was made to prevent a financial crisis and lower interest rates.

The inflation rate fell from 2.3% before the recession to 1.4% in September. Given the information in the paragraph above, was this decline in inflation better predicted by monetarist economic theory or Keynesian economic theory? Please write your answer in the text box below. Please DO NOT write out an explanation, just your answer to the question.

24.  The Trump administration has increased tariffs (taxes on imports) on imports from China.  Most of the tariffs are in so-called intermediate goods, used to produce goods and service in the United States. This will raise the  cost of producing U.S. goods that are made with Chinese parts and cause:

Group of answer choices

A aggregate demand to decrease.

B aggregate demand to increase.

C aggregate supply to increase.

D aggregate supply to decrease.

Answer 1

The decline in inflation was better predicted by Keynesian view as the unemployment level was higher and due to absence of government spending support the disposable incomes declined significantly causing consumption to decline and thus inflation dropped.

Solution is : Aggregate supply to decrease.

The impirt tarriff is aimed at discouraging imports from China which reduces aggregate supply of Chinese goods and thus make it expensive which leads to reduction in usage of Chinese goods.