If the unemployment rate is ________ the natural rate, then we expect to see ________ wages, causing the short-run aggregate supply curve to shift up.
A) less than; increasing
B) less than; decreasing
C) greater than; increasing
D) greater than; decreasing

Question

Quizplus · Accepted Answer

When the unemployment rate is less than the natural rate, it indicates a tight labor market. This situation typically leads to increasing wages as employers compete for a limited pool of workers, which in turn can cause the short-run aggregate supply curve to shift up due to higher production costs.

If the Unemployment Rate Is ________ the Natural Rate, Then