Suppose Policy Makers Underestimate the Natural Rate of Unemployment

Multiple Choice

Suppose policy makers underestimate the natural rate of unemployment. In such situations, policy makers will likely implement policies that result in:

A) a steadily decreasing inflation rate.
B) overly restrictive monetary and fiscal policy.
C) more unemployment than necessary.
D) a higher inflation rate than necessary.
E) an unemployment rate that is "too high".