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 in the short run and ________ in the inflation rate in the short 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

The development of a new, more productive technology increases productivity, which can lead to a decrease in the unemployment rate as firms may need to hire more workers to manage and operate the new technology. Additionally, increased productivity can lower production costs, which can lead to lower prices or a decrease in the inflation rate in the short run.

Suppose the Economy Is Producing at the Natural Rate of Output