If policy makers think the natural rate of unemployment is higher than it really is,then their policies designed to move the economy to the estimated natural rate,if continued over the long run,will
A)cause continuing inflation
B)shift the long-run aggregate supply curve to the left
C)shift the supply curve of labor to the left
D)reduce unemployment more than they had intended
E)keep the economy below its potential GDP level

Question

Quizplus · Accepted Answer

If policymakers think the natural rate of unemployment is higher than it really is, they will set policies that aim to reduce unemployment below its natural rate. However, in the long run, this will lead to inflation as the economy operates above its potential output level.

If Policy Makers Think the Natural Rate of Unemployment Is