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WAEC Economics 2004 Question 35

Question 35

Money and Inflation

When the general price level persistently falls, the rate of unemployment

  1. A.rises
  2. B.stagnates
  3. C.rapidly reduces
  4. D.equals natural growth rate
Show the answer and explanation

Answer: A (rises)

Explanation

Falling prices (deflation) reduce profits and production, so firms lay off workers and unemployment rises.