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