Under Which of the Following Conditions Will the Actual Rate

question 48

Multiple Choice

Under which of the following conditions will the actual rate of unemployment tend to rise above the natural rate of unemployment?

• A) Prices are stable and have been for the last four years.
• B) Inflation is 3 percent and was widely anticipated more than a year ago.
• C) Expansionary monetary policies lead to an unexpected increase in inflation from 3 percent to 7 percent.
• D) Restrictive monetary policies lead to an unexpected reduction in inflation from 6 percent to 2 percent.

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Definitions:

Total Cost

The complete cost of production including fixed and variable costs.

Average Total Cost

The total of all costs divided by the number of goods produced, representing the per unit production cost.

Output

The total amount of goods or services produced by an individual, company, or country.

Total Variable Cost

The sum of all costs that vary with output level in the production process.