In the long run,the Fed may decrease the unemployment rate only if it is willing to increase the rate of inflation.

Question

Quizplus · Accepted Answer

In the long run, according to the natural rate of unemployment theory and the concept of the Phillips Curve, the unemployment rate is determined by real factors like labor market efficiencies, technology, and resources. The Fed's influence over the unemployment rate through monetary policy (including inflation adjustments) is considered temporary, as long-term unemployment is not primarily influenced by monetary factors.

In the Long Run,the Fed May Decrease the Unemployment Rate