If Policy Makers Think the Natural Rate of Unemployment Is

question 67

Multiple Choice

If policy makers think the natural rate of unemployment is higher than it really is,then their policies designed to move the economy to the estimated natural rate,if continued over the long run,will

• A)cause continuing inflation
• B)shift the long-run aggregate supply curve to the left
• C)shift the supply curve of labor to the left
• D)reduce unemployment more than they had intended
• E)keep the economy below its potential GDP level

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Definitions:

Weighted Average

A mathematical calculation that takes into account the varying degrees of importance of the numbers in a data set, providing a measure that reflects the relative importance of each value.

Unlevered Cost

The cost of an investment or project without considering the effects of debt financing, focusing solely on equity-financed expenses.

Cost of Debt

The effective rate a company pays on its current debt, incorporating the tax shield benefits of interest payments.

Asset Beta

A measure of the risk of an asset held in isolation, compared to the market as a whole.