Suppose We Know the Following Information About a Hypothetical Economy

Multiple Choice

Suppose we know the following information about a hypothetical economy: - real GDP = $945 billion
- potential GDP = $900 billion
- inflation rate = 3%
If the central bank conducts monetary policy in an attempt to keep the unemployment rate below the NAIRU,the inflation rate is likely to

A) cause stagflation.
B) cause a recession.
C) remain constant at 3%.
D) fall below 3%.
E) rise above 3%.