Question: Economic policies in the 1960s were based on the combination of the circular flow model of the economy and the Phillips curve relationship between inflation and unemployment. Given only these two ideas, answer the questions below:
a. Name two government policies that would reduce the unemployment rate.
b. Name two government policies that would reduce the inflation rate.
c. Government spending increased rapidly during the 1960s, but taxes were not raised to finance the deficit. How would this affect inflation and unemployment? Why? Explain in terms of the two models used for this question.
d. What government policies would fight both inflation and unemployment? Explain.