Question

Many economists argue as follows: “because there is no long-run tradeoff between
unemployment and inflation, there is no point in trying to shave the peaks and troughs from the
business cycle.” This view suggests that we should not care whether the economy is stable or
fluctuating widely as long as the average level of unemployment is the same. Discuss

Answer 1

*Answer:

"Because there is no long-run tradeoff between unemployment and inflation, there is no point in trying to shave the peaks and troughs from the business cycle."

The statement given above describes that the wage gap in a long run affects the living standards of the labour which tends to increase inflation and unemployment. The condition of the national income as plays role which shows the economy of the nation. In case, the government policy shows budget deficit, then increase in the aggregate demand would tend to lower down the unemployment. Perhaps, the budget surplus would bring down the economy and reduce the inflation. There are fiscal policy which is going to strengthen the rate of employment. In short run, the government's fiscal policy tends to increase employment ration. It shows increase in expenditures, increase in aggregate demand, employment and efficeincy of the firms to generate the output.

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