Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Underemployment decreases inflation rates due to lower consumer spending.
B
Underemployment has no effect on inflation rates.
C
Underemployment increases inflation rates as it signifies a lack of available labor.
D
Underemployment decreases inflation rates because it leads to higher production capacity.
Understanding the Answer
Let's break down why this is correct
Answer
Underemployment occurs when people work in jobs that do not fully use their skills or when they want more hours but cannot find them. This situation can affect inflation rates because when many people are underemployed, they have less money to spend. When consumers spend less, demand for goods and services decreases, which can lead to lower prices, or deflation. For example, if a skilled worker is only able to find part-time work, they might cut back on spending, which can slow down the economy. Therefore, high levels of underemployment can create downward pressure on inflation, making it harder for prices to rise even when the economy is growing.
Detailed Explanation
When people are underemployed, they earn less money. Other options are incorrect because Some might think underemployment has no effect on inflation; It's a common belief that underemployment means fewer workers available, which could raise prices.
Key Concepts
underemployment
inflation relationship
Topic
Unemployment Rates and Economic Indicators
Difficulty
medium level question
Cognitive Level
understand
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