Suppose you knew that the NAIRU (the non accelerating inflation rate of unemployment ) was 5.5 percent.
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Question:
Suppose you knew that the NAIRU (the non accelerating inflation rate of unemployment ) was 5.5 percent. The current unemployment rate is 5 percent.
a) Is an increase in government spending more likely to increase output or increase prices?
b) Now the unemployment rate rises to 6.5 percent , but the NAIRU stays the same. Is an increase in government more likely to increase output to to increase prices?
Expert Answer:
a With the current unemployment rate below the NAIRU 5 55 an increase in government spe... View the full answer
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