Suppose the measured unemployment rate is 4.5 and the true ...

[soccerdreamer_17]

Suppose the measured unemployment rate is 4.5 and the true natural rate of unemployment is 5.1. What should policymakers do in this situation? Suppose that the chair of the Federal Reserve believes the natural rate of unemployment to be 4.0.
 
  What will the chair of the Fed do in this situation, and will this be a good decision?

Question 2

The most people live in ________ economies, and the fewest people live in ________ economies.
 
  A) developing; emerging market
  B) advanced; emerging market
  C) advanced; developing
  D) emerging market; developing
  E) developing; advanced

[janeli1]

Answer to Question 1

If the true natural rate of unemployment is above the measured unemployment rate, this means that policymakers should try to slow the economy. If the chair of the Fed believes the natural rate of unemployment to be below the measured unemployment rate, she will stimulate the economy, which will be a bad decision as the economy may become overstimulated and result in an increase in the inflation rate.

Answer to Question 2

A

[soccerdreamer_17]

Thanks for the timely response, appreciate it

[amit]

YES! Correct, THANKS for helping me on my review