The formulation of active policy is
A)made easier if the natural unemployment rate can be easily calculated
B)made easier if the natural unemployment rate cannot be easily calculated
C)made more difficult if the natural unemployment rate can be easily calculated
D)made more difficult if the natural unemployment rate cannot be easily calculated
E)done without considering the natural unemployment rate because such a policy focuses on rules to follow in any unemployment situation

Question

Quizplus · Accepted Answer

If the natural unemployment rate cannot be easily calculated, formulating active policy becomes more difficult. This is because the natural rate of unemployment is an important determinant of the effectiveness of active policy. If policy-makers are unsure about what the natural rate of unemployment is, they may make mistakes in setting policy, such as trying to reduce unemployment past its natural rate through expansive fiscal or monetary policy, resulting in higher inflation.

The Formulation of Active Policy Is