In the long run when governments attempt to target unemployment below the natural rate we can expect inflation crowding out increase in export revenue higher tax revenue
In the long run when governments attempt to target
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inflation |
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crowding out |
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increase in export revenue |
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higher tax revenue |
Answer -
1. Inflation - When government try to bring unemployment below " natural rate " . It must to spend more and central bank will use expansionary fiscal policy which lead to increase in inflation.
2. Crowding out - When increase spending using deficit financing but this lead higher interest rate which lead low consumption and investment as private firm reducing there investment operations .
3. Increase in export revenue - As government try to bring unemployment below it's natural rate for which they have to invest more . Which help business to grow and might led higher exports
4. Higher tax revenue - Higher employment lead to higher taxs in revenue.
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