Suppose you're in charge of economic policy. Today's unemployment rate is 3.6%, and you estimate that the natural rate of unemployment is 4.5%. Should you stimulate the economy or work to slow it down? What will be the effect of your decision if your estimate of the natural rate is wrong, and it's really in the 3.4% range? Explain!

Suppose you're in charge of economic policy. Today's unemployment rate is 3.6%, and you estimate that the natural rate of unemployment is 4.5%. Should you stimulate the economy or work to slow it down? What will be the effect of your decision if your estimate of the natural rate is wrong, and it's really in the 3.4% range? Explain!

Principles of Macroeconomics (MindTap Course List)

7th Edition

ISBN:9781285165912

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter15: Unemployment

Section15.1: Ldentifyinr Unemployment

Problem 1QQ

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