If the Fed Were to Push Unemployment Below the NAIRU

question 34

Multiple Choice

If the Fed were to push unemployment below the NAIRU:

• A) inflation would likely increase.
• B) deflation would likely send the economy into a deflationary spiral.
• C) the dual mandate will have been met.
• D) the economy would be operating efficiently.

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Definitions:

Technical Efficiency

Condition under which firms combine inputs to produce a given output as inexpensively as possible.

Empirical Research

A method of research that relies on the collection and analysis of data to obtain evidence that can be observed or measured.

Positive

A term that can refer to a favorable outcome or condition, or in statistics, a correlation where two variables move in the same direction.

Marginal Product

The extra production yielded from the use of one additional unit of a specific input while keeping all other inputs unchanged.