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Suppose That a Policy Response to Cyclical Unemployment Is Mistimed

Question 41

Multiple Choice

Suppose that a policy response to cyclical unemployment is mistimed or overshoots its target,resulting in output above the full-employment level.Output will:


A) eventually return to the full-employment level because at some point,workers will no longer continue to supply as much labor at each nominal wage
B) eventually return to the full-employment level because nominal wage rates are rigid
C) eventually return to the full-employment level because workers will not adjust their acceptance wages
D) stay above the full-employment level until corrective policy action is taken

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