Suppose We Know the Following Information About a Hypothetical Economy

question 77

Multiple Choice

Suppose we know the following information about a hypothetical economy: - actual unemployment rate = 6%
- NAIRU = 8%
- inflation rate = 4%
If the central bank tries to maintain the current output gap,we can expect the inflation rate to

• A)remain constant at 4%.
• B)fall below 4%.
• C)rise above 4%.
• D)cause stagflation.
• E)cause a recession.

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