The measured unemployment rate can be pushed below the natural rate, but ?
Correct answer: A. only in the short run, and not without inflation
- A. only in the short run, and not without inflation
- B. only in the long run and not without inflation
- C. only is the short run and only if the price level is constant
- D. only in the long run and only if the price level is constant
Explanation
Unemployment can fall below its natural rate temporarily when unexpected inflation reduces real wages and increases employment, but workers eventually adjust their expectations. Therefore, the result is possible only in the short run and involves inflation.
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