(a) When the economy approaches full employment, why does demand-pull inflation become a problem?
When the economy is heading into a recession what economic policy instruments can the government and the central bank use to prevent this from occurring? Will these instruments work to prevent the onset of recession?
Because employment and inflation have inversely proportional relationship. This relationship can be demonstrated by Fillips curve. first of all, economic policy should be formed using reasons, which lead this recession. But in general government and central bank should use stabilizing methods, strict measures in problem areas and stimulating in crutial spheres of national economy.