Suppose a country has full employment and price stability when the unemployment rate is 4% to 5%, inflation runs at 2% to 3%, and real GDP grows at a rate of 2.25% to 3% per year. A functional finance economist would advocate doing nothing if the unemployment rate was 4.5% and the

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Functional finance economists focus on achieving policy goals such as full employment and price stability rather than targeting specific fiscal outcomes like budget deficits or surpluses. In option A, with an unemployment rate of 4.5%, economic growth at 3%, and inflation at 2%, the economy is within the target ranges for full employment, price stability, and growth, suggesting no immediate fiscal action is necessary.

Suppose a Country Has Full Employment and Price Stability When