Figure 14.4

-Refer to Figure 14.4. If the observed unemployment rate equals the natural rate, and the expected rate of inflation equals zero, the economy will be operating at:
A) point A.
B) point B.
C) point C.
D) point D.
E) point E.

Question

Figure 14.4
 
-Refer to Figure 14.4. If the observed unemployment rate equals the natural rate, and the expected rate of inflation equals zero, the economy will be operating at:
A) point A. 
B) point B. 
C) point C. 
D) point D. 
E) point E.

Quizplus · Accepted Answer

At point A, the actual unemployment rate equals the natural rate of unemployment, and the expected rate of inflation equals zero. This implies that the economy is operating at its potential output with no inflationary or recessionary pressures.

Figure 14.4 -Refer to Figure 14.4. If the Observed Unemployment Rate Equals