Unemployment and Inflation in Economic Crises

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The book delves into the dynamics of unemployment and inflation during economic crises, focusing on two scenarios in Europe: a demand shock and a supply shock. In the demand shock scenario, interactions between monetary and fiscal policies lead to significant fluctuations in unemployment, inflation, and government spending in Europe, without impacting the U.S. economy. Conversely, a supply shock results in dramatic changes in European government spending and money supply, while causing synchronized effects on American unemployment and inflation, along with a decrease in U.S. government purchases.