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Explain the logic of a potential short run trade off

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Reference no: EM131137884

The President of Bartavia is being advised on economic policy by you, his economic advisor. Assume that Bartavia is very close to the full employment level (resources are almost all fully employed in the economy) but the President of Bartavia is still worried about unemployment.

Therefore he wants to enact some expansionary fiscal policy.

How would you explain the logic of a potential short run trade-off between unemployment and inflation to the President?

In other words, why might there be an inverse relationship between unemployment and inflation over the short run when the economy is very close to full employment and no technological advances are occurring simultaneously?

Reference no: EM131137884

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