Decreasing aggregate demand to eliminate an inflationary gap often creates the problem of
A)unemployment.
B)increasing real GDP.
C)increasing inflation.
D)increasing the labor force.

Question

Quizplus · Accepted Answer

When aggregate demand is decreased to eliminate an inflationary gap, it can lead to a decrease in production and ultimately result in layoffs and unemployment. This is because businesses will produce less to match the decreased demand, resulting in a decrease in the need for labor.

Decreasing Aggregate Demand to Eliminate an Inflationary Gap Often Creates