Any policy change that reduced the natural rate of unemployment
A)would shift the long-run Phillips curve to the right.
B)would shift the long-run aggregate-supply curve to the right.
C)would be a policy change that impeded the functioning of the labor market.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

The natural rate of unemployment is the unemployment rate that exists when the labor market is in equilibrium, and there is no cyclical unemployment. Any policy change that reduces the natural rate of unemployment, such as improving labor market flexibility, increasing education and training, or reducing barriers to entry for new businesses, would increase the economy's potential output and shift the long-run aggregate-supply curve to the right. This shift would not impede the functioning of the labor market or shift the long-run Phillips curve, which shows the inverse relationship between unemployment and inflation in the long run. Therefore, the correct answer is B.

Any Policy Change That Reduced the Natural Rate of Unemployment