Suppose the Natural Unemployment Rate Is 5 Percent

question 46

Multiple Choice

Suppose the natural unemployment rate is 5 percent.Which of the following observations is consistent with an economy that is self-regulating?

• A) The unemployment rate in the economy is always above 5 percent.
• B) The unemployment rate in the economy is always below 5 percent.
• C) There is a tendency for the unemployment rate in the economy to move toward 5 percent.
• D) If the unemployment rate in the economy is greater than 5 percent, wages start to rise.
• E) If the unemployment rate in the economy is less than 5 percent, wages start to fall.

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Definitions:

Real Buying Power

The quantity of goods and services that can be purchased with a given amount of money, adjusting for inflation.

Short-Term Losses

Financial losses incurred over a short period of time, typically within a fiscal year, often used to offset taxes on gains.

Market Crashes

Market crashes represent dramatic declines in stock market values over a short period, often leading to widespread financial panic.