Why have fiscal and monetary policies been criticized as tools to fight stagflation?
A)Because they are able to cure unemployment but not inflation.
B)Because they are able to cure inflation but not unemployment.
C)Because they are unable to cure either unemployment or inflation.
D)Because they are unable to cure both unemployment and inflation at the same time.

Question

Quizplus · Accepted Answer

Fiscal and monetary policies have been criticized as tools to fight stagflation because they are unable to cure both unemployment and inflation at the same time. For instance, expansionary policies like increasing government spending or lowering interest rates can reduce unemployment but can also lead to increased inflation. On the other hand, contractionary policies like reducing government spending or increasing interest rates can lower inflation but can also lead to higher unemployment. Therefore, using these policies to fight stagflation can result in negative side effects on other factors of the economy.

Why Have Fiscal and Monetary Policies Been Criticized as Tools