Question

Because the Fed doubled the monetary base in 2008 and because the government has spent billions of dollars bailing out troubled banks, insurance companies, and auto producers, some people are concerned that a serious upturn in the inflation rate will occur, not immediately but in a few years' time.

At the same time, massive changes in the global economy might bring the need for structural change in the United States.

Structural change__________.

A ) Increases the natural unemployment rate and shifts the short-run Phillips curve upward

B) Increases the expected inflation rate and shifts both the short-run Phillips curve and long-run Phillips curve rightward

C) Increases the natural unemployment rate and shifts both the short run Phillips curve and long run Phillips curve rightward

D) Increases the actual unemployment rate and creates a movement along the short-run Phillips curve. The long-run Phillips curve does not change

Answer 1

The structural changes increases structural unemployment, thereby increasing the natural unemployment rate. The long run and short run phillips curve shifts rightward which worsens the tradeoff between unemployment and infaltion.

The natural unemployment is the lowest rate of unemployment an economy will reach.It is caused by natural causes and not by the economy being in bad condition.

So, the right option is (C) increases the natural unemployment rate and shifts both the short-run and long run phillips curve rightward.