If the Natural Rate of Unemployment Is 6%, but the Fed

question 156

Multiple Choice

If the natural rate of unemployment is 6%, but the Fed thinks it is 5% and attempts to use monetary policy to move unemployment from 6% to 5% then in the short run which of the following variables will the Fed's policy raise above their long-run levels?

• A)the price level and real GDP
• B)the price level but not real GDP
• C)real GDP but not the price level
• D)neither real GDP nor the price level

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Definitions:

Evaporation

The process by which liquid water transforms into vapor or gas, often driven by heat from the sun.

Precipitation

Any type of water, whether in liquid or solid state, descending from the sky to the earth's surface, encompassing phenomena like rain, snow, sleet, and hail.

Acre-Foot

A unit of volume used in the United States to measure large-scale water resources, such as in reservoirs or irrigation, equal to the volume of water required to cover one acre of land one foot deep.

Football Fields

Standard units of measurement representing the playing area for American football, approximately 360 feet in length and 160 feet in width.