If the Fed were to allow unemployment to remain at a higher level than NAIRU:
A) It would lead to deflation.
B) the dual mandate would be violated.
C) they would fail to maintain full employment.
D) All of these statements are true.

Question

Quizplus · Accepted Answer

The Fed's dual mandate is to maintain full employment and price stability. If the Fed were to allow unemployment to remain at a higher level than NAIRU, it would be failing to maintain full employment. Additionally, it would lead to deflation, as there would be less demand for goods and services.

If the Fed Were to Allow Unemployment to Remain at a Higher