The accelerationist principle stipulates that a government determined to use monetary policy to keep
A) employment below the natural rate for any lengthy period will have to continually increase the rate of inflation to do so.
B) unemployment below the natural rate for any lengthy period will have to continually increase the rate of inflation to do so.
C) unemployment below the natural rate for a short period will have to continually increase the rate of inflation to do so.
D) unemployment below the natural rate for any short period will have to continually decrease the rate of inflation to do so.
E) unemployment above the natural rate for any lengthy period will have to continually increase the rate of inflation to do so.

Question

Quizplus · Accepted Answer

The accelerationist principle states that if a government wants to keep unemployment below the natural rate for a lengthy period, it will have to continually increase the rate of inflation. This principle suggests that there is a trade-off between inflation and unemployment. The government can reduce unemployment temporarily by increasing demand through expansionary monetary policy, but this will lead to higher inflation over time. Therefore, the government must decide which trade-off it is willing to make between unemployment and inflation.

The Accelerationist Principle Stipulates That a Government Determined to Use