The Observed Unemployment Rate Would Be Less Than the Natural

question 91

Multiple Choice

The observed unemployment rate would be less than the natural rate of unemployment if

• A) the inflation rate is lower than expected.
• B) the reservation wage is adjusted to account for higher inflation.
• C) the inflation rate is expected.
• D) reservation wages go up with the rate of inflation.
• E) the inflation rate is higher than expected.

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Definitions:

Decreasing-cost Industry

An industry characterized by a reduction in average costs as the scale of production increases, usually due to factors like technological advances.

Long-run Equilibrium

Long-run equilibrium occurs in a market when all producers and consumers have fully adjusted to any changes in the market conditions, with no excess supply or demand.

Economic Profits

The variance between total income and total expenses of a business, factoring in both clear and hidden costs.

Constant-cost Industry

An industry where input costs remain unchanged as industry output changes, leading to a flat supply curve.