Economic Analysis of Social Issues 1st Edition by Alan Grant

Exercise 22

Suppose that today's measured unemployment rate is 6%, and the true natural rate of unemployment is 4.8%. If the chair of the Fed believes the natural rate of unemployment to be 6.2%, then the chair will________.
A) Stimulate the economy when it should be slowed
B) Slow the economy when it should be stimulated
C) Stimulate the economy, exactly as called for
D) Slow the economy, exactly as called for