Figure 28-1
-Refer to Figure 28-1. Suppose that the economy is currently at point A, and the unemployment rate at A is the natural rate. What policy would the Federal Reserve pursue if it wanted the economy to move to point B in the long run?

Question

Figure 28-1 
-Refer to Figure 28-1. Suppose that the economy is currently at point A, and the unemployment rate at A is the natural rate. What policy would the Federal Reserve pursue if it wanted the economy to move to point B in the long run?

Quizplus · Accepted Answer

In the long run, the economy naturally returns to the natural rate of unemployment due to self-correcting mechanisms. The Federal Reserve cannot permanently change the natural rate of unemployment through monetary policy.

Figure 28-1 -Refer to Figure 28-1. Suppose That the Economy Is Currently