Suppose the natural unemployment rate is 5 percent.Which of the following observations is consistent with an economy that is self-regulating?

Question

Quizplus · Accepted Answer

A self-regulating economy tends to move toward its natural rate of unemployment, which in this case is 5 percent. Options A, B, D and E suggest that the unemployment rate remains consistently above or below the natural rate or that there are wage adjustments in response to deviations from the natural rate, which suggests an unregulated or unstable economy. Option C suggests that the economy tends to correct itself by moving toward the natural rate of unemployment, which is consistent with a self-regulating economy.

Suppose the Natural Unemployment Rate Is 5 Percent