Suppose the economy was at full employment last year. Now supposed that the U. S. declared war on a country in the Middle East AND created a program ensuring all high school seniors could receive federal funding for college. Given this scenario, which of these would be MOST likely to take place?

Question

Rudy Petersen

Social Studies

12 March, 03:16

Suppose the economy was at full employment last year. Now supposed that the U. S. declared war on a country in the Middle East AND created a program ensuring all high school seniors could receive federal funding for college. Given this scenario, which of these would be MOST likely to take place?

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Answers (2)

Know the Answer?

Chloe Petersen · Answer 1

d. increased inflation

Faith Ferguson · Answer 2

The economy at full employment means that all people are employed, except those who do not wish to or cases of transitory unemployment. This is a number of approximately 5% of people without jobs.

Rarely does an economy reach full employment. If everyone is employed, there is a lot of money in circulation and the economy is warm.

In this way, if the Government goes to war, it will have spent more and still, if funding is granted, there will be more money in circulation in the hands of the public. This can boost an inflationary process, since inflation is a monetary phenomenon, associated with the amount of money in circulation.