If the Fed Believes the Natural Rate of Unemployment Is

Multiple Choice

If the Fed believes the natural rate of unemployment is 5.5 percent and the natural rate is really 5 percent,what is likely to happen in the short run?

A) The Fed will allow unemployment to be unnecessarily high and output to be unnecessarily low.
B) The Fed will allow unemployment to be unnecessarily high,but output will remain at potential.
C) The Fed will allow unemployment to be unnecessarily low and output to be unnecessarily high.
D) The Fed will allow output to be unnecessarily low,but unemployment will remain at the natural rate.
E) The Fed will allow unemployment to be unnecessarily low and output to be unnecessarily low.