Probably the Most Significant Implication of the Natural Rate of Unemployment

question 67

Multiple Choice

Probably the most significant implication of the natural rate of unemployment hypothesis is that

• A)the natural rate of inflation tends toward zero
• B)long-run policy should be directed toward controlling inflation rather than unemployment
• C)the natural rate of unemployment can be reduced by accepting worsening inflation
• D)the natural rate of unemployment is consistent only with a zero inflation rate in the long run
• E)tax cuts stimulate the economy and lower inflation

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Definitions:

Demand Curves

Graphs showing the relationship between the price of a good and the quantity of the good that consumers are willing and able to purchase at various prices.

Influence Over Price

The ability of a seller or a buyer to affect the price of goods or services in the market.

Economic Profits

The surplus remaining after total costs (including both explicit and implicit costs) are subtracted from total revenue; often indicates the firm is outperforming the average in its industry.

Industry Supply Curve

A graphical representation showing the relationship between the price of a commodity and the quantity supplied by all producers in the market.