Suppose the economy is producing at the natural rate of output. Assuming a fixed natural rate of output and everything else held constant,the development of a new,more productive technology will cause ________ in the unemployment rate and ________ in the inflation in the long run.
A)an increase;an increase
B)a decrease;a decrease
C)a decrease;an increase
D)no change;no change

Question

Quizplus · Accepted Answer

If the economy is already producing at the natural rate of output, then the development of a new, more productive technology will not cause any long-run changes in the unemployment rate or inflation. This is because the natural rate of output is the level of output consistent with full employment, so any increase in productivity will simply allow the economy to produce more goods and services without pushing unemployment below its natural rate or increasing inflation.

Suppose the Economy Is Producing at the Natural Rate of Output