If the Fed were to push unemployment below NAIRU,it is likely that:
A)inflation will get out of control.
B)deflation will send the economy into a deflationary spiral.
C)the dual mandate will be met.
D)All of these statements are true.

Question

Quizplus · Accepted Answer

The Non-Accelerating Inflation Rate of Unemployment (NAIRU) is the level of unemployment below which inflation is likely to increase. If the Fed were to push unemployment below NAIRU, it is likely that inflation will get out of control. This is because a tight labor market leads to higher wages which, in turn, can lead to higher prices as companies pass on the increased labor costs to their customers. Therefore, choice A is the best answer.

If the Fed Were to Push Unemployment Below NAIRU,it Is