Suppose that the unemployment rate is ________ the natural rate. We would expect prices to fall, money demand to fall, interest rates to fall, and total demand to ________.
A) above; rise
B) above; fall
C) below; rise
D) below; fall

Question

Quizplus · Accepted Answer

When the unemployment rate is above the natural rate, it indicates a recessionary gap, leading to lower prices, reduced money demand, falling interest rates, and an increase in total demand as the economy adjusts back to full employment.

Suppose That the Unemployment Rate Is ________ the Natural Rate