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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Definitions:

Supine Position

Lying on the back with the face or front of the body upward.

Stroke Volume

The amount of blood ejected by the left ventricle of the heart in one contraction, an important parameter in assessing cardiac health.

Elasticity

The ability of a material or tissue to resume its normal shape after being stretched or compressed.

Diastole

The phase of the heart cycle during which the heart relaxes and fills with blood following contraction.