If Policy Makers Estimate the Natural Rate of Unemployment Incorrectly

question 42

Multiple Choice

If policy makers estimate the natural rate of unemployment incorrectly, _____

• A) their policies will cause deflation in the long run.
• B) their policies will cause even more unemployment in the long run.
• C) the economy will stay below its potential GDP in the long run.
• D) the economy will tend toward the level of unemployment the policy makers believe is correct.
• E) the policies that appear to be successful in the short run will lead to inflation in the long run.

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