If the Unemployment Rate Falls Below the Natural Rate of Unemployment

question 79

Multiple Choice

If the unemployment rate falls below the natural rate of unemployment (u*) ,

• A) the government will want to conduct expansionary fiscal policy.
• B) the Federal Reserve will want to conduct expansionary monetary policy.
• C) the economy is in a recession.
• D) there will be no worries about inflation.
• E) the government will want to conduct contractionary fiscal policy.

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Definitions:

Differential Revenue

The difference in revenue from one alternative to another, used in decision-making processes.

Differential Cost

The difference in cost between two alternative decisions, or the change in costs resulting from an increase or decrease in output.

Differential Revenue

The variation in income resulting from choosing between two different options or time frames.

Differential Effect

The financial impact of a business decision that results in changes to costs or revenue, compared to maintaining the status quo.