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Suppose That the Natural Rate of Unemployment for the Economy

question 80

Essay

Suppose that the natural rate of unemployment for the economy is 6 percent and the economy is currently experiencing a 4 percent unemployment rate. Explain what will likely happen to wages and prices as the economy adjusts to the long- run equilibrium.


Definitions:

Alertness

A state of active attention and readiness to respond to stimuli or challenges presented.

Hypothalamus

A region of the brain below the thalamus that coordinates both the autonomic nervous system and the activity of the pituitary, controlling body temperature, hunger, thirst, and other homeostatic systems.

Neural System

The network of nerve cells and fibers which transmits nerve impulses between parts of the body, enabling communication between the brain, spinal cord, and other areas.

Limbic System

A complex system of nerves and networks in the brain, involved in basic emotions such as fear and pleasure, as well as drives like those related to hunger and sex.

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