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

Question

Quizplus · Accepted Answer

A policy change that reduces the natural rate of unemployment would shift the long-run Phillips curve to the left, which indicates that inflation could be lower for a given rate of unemployment. It would also shift the long-run aggregate supply curve to the right, as lower unemployment could lead to increased productivity and potential output. Additionally, reducing the natural rate of unemployment would improve the functioning of the labor market by reducing the amount of time it takes for unemployed workers to find new jobs and lowering the cost of job search. Therefore, all three options are correct.

Any Policy Change That Reduced the Natural Rate of Unemployment