Suppose We Know the Following Information About a Hypothetical Economy

question 52

Multiple Choice

Suppose we know the following information about a hypothetical economy: - real GDP = $945 billion
- potential GDP = $900 billion
- inflation rate = 3%
If the central bank conducts monetary policy in an attempt to keep the unemployment rate below the NAIRU,the inflation rate is likely to

• A)cause stagflation.
• B)cause a recession.
• C)remain constant at 3%.
• D)fall below 3%.
• E)rise above 3%.