The measured unemployment rate can be pushed below the natural rate, but:
A) only in the long run and only if the price level is constant.
B) only in the short run and not without inflation exceeding expectations.
C) only in the long run and not without inflation.
D) only in the short run and only if the price level is constant.

Question

Quizplus · Accepted Answer

The natural rate of unemployment is the lowest level of unemployment possible without causing inflation. In the short run, the measured unemployment rate can be pushed below the natural rate through increased demand for labor, such as through government stimulus or low interest rates. However, this will eventually result in inflation exceeding expectations, which can be harmful to the economy in the long run. Therefore, Option B is the best choice.

The Measured Unemployment Rate Can Be Pushed Below the Natural