When the economy is on operating beyond the natural rate of real output, efforts to bring inflation down with monetary policy will be ____ successful and efforts to stimulate the economy will be ____ successful.
A)More; less
B)More; more
C)Less; less
D)Less; more

Question

When the economy is on operating beyond the natural rate of real output, efforts to bring inflation down with monetary policy will be ____ successful and efforts to stimulate the economy will be ____ successful.
A)​More; less
B)​More; more
C)​Less; less
D)​Less; more

Quizplus · Accepted Answer

When the economy is operating beyond its natural rate, it is typically experiencing inflationary pressures. Monetary policy aimed at reducing inflation (such as raising interest rates) is more likely to be successful in this scenario. Conversely, efforts to stimulate the economy further (such as lowering interest rates) are less likely to be successful because the economy is already operating at or beyond full capacity.

When the Economy Is on Operating Beyond the Natural Rate