A reduction in aggregate demand results from the Fed's slowing of money expansion. By doing this, businesses generate less goods and services. Increased unemployment results from this.
When overall consumer spending falls, the aggregate demand curve typically generally shifts to the left. The growing cost of living or the higher tax burden on the public could be causing consumers to spend less. If consumers believe prices will grow in the future, they may choose to spend less and save more.
As the change in price level leads to a change in output, the decline in aggregate demand or supply will result in more unemployment. When total demand falls, prices go down, and when total supply falls, prices go up.
A reduction in aggregate demand results from the Fed's slowing of money expansion. By doing this, businesses generate less goods and services. Increased unemployment results from this.
Therefore, the correct answer is option b) higher unemployment and lower inflation.
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