6. An economy is in long-run macroeconomic equilibrium with an unemployment rate of 3.5% and an inflation rate of 2%, whenthe government passes a law requiring the central bank to use monetary policy to lower the unemployment rate to 2% andkeep it there.Which of the following would be a consequence of the law?O a. In the long run, the unemployment rate will be equal to 2% and the inflation rate will be equal to 2%.O b. In the long run, the unemployment rate will be 3.5% but the inflation rate will be higher than 2%:Oc In the long run, the unemployment rate will be higher than 3.5% and the inflation rate will be higher than 2%.O d. In the long run, the unemployment rate will fall below 3.5% but the inflation rate will be higher than 29%.

With long run equilibrium or Natural rate of unemployment at potential output is 3.5 %, the short…

An economy is in long-run macroeconomic equilibrium with an unemployment rate of 3.5% and an inflation rate of 2%, when the government passes a law requiring the central bank to use monetary policy to lower the unemployment rate to 2% and keep it there. Which of the following would be a consequence of the law?

An economy is in long-run macroeconomic equilibrium with an unemployment rate of 3.5% and an inflation rate of 2%, when the government passes a law requiring the central bank to use monetary policy to lower the unemployment rate to 2% and keep it there. Which of the following would be a consequence of the law?

Principles of Macroeconomics (MindTap Course List)

7th Edition

ISBN:9781285165912

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter20: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 4QCMC

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