If the Unemployment Rate Is Less Than the NAIRU

question 13

Multiple Choice

If the unemployment rate is less than the NAIRU,

• A)there will be downward pressure on wages.
• B)demand forces will exert upward pressure on wages.
• C)there is a recessionary output gap.
• D)the AS curve will shift downward.
• E)there is no pressure on the AS curve to shift.

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Definitions:

Consumer Spending

The total expenditures by households on goods and services, excluding new housing, which drives a significant portion of economic activity.

Income

The amount of money received on a regular basis through work or investments.

Multiplier Effect

The relative change in net income resulting from an addition or reduction in expenditure.

Crowding out

A situation in economics where increased government spending displaces private sector spending, either through higher taxes, higher interest rates, or borrowing.