Attempts by policymakers to keep the rate of unemployment below the natural rate of unemployment for a sustained period of time will result in
A)demand-pull inflation.
B)permanently higher levels of output.
C)a recession.
D)a shift of the LRAS curve to the left.

Question

Quizplus · Accepted Answer

Attempting to keep unemployment below the natural rate of unemployment for a prolonged period will result in demand-pull inflation as firms struggle to meet the demand for their products with a limited supply of labor. This leads to higher wages and increased production costs, which are then passed on to consumers in the form of higher prices.

Attempts by Policymakers to Keep the Rate of Unemployment Below