According to the natural rate hypothesis, if the economy begins at full employment with an unemployment rate of 5 percent and then the inflation rate increases from 2 percent to 4 percent, then the economy will
A) not see any lower unemployment, even temporarily, just higher inflation.
B) have lower unemployment but then return to its natural rate with an inflation rate of 4 percent.
C) eventually return to its natural rate of 2 percent inflation and its natural unemployment rate of 5 percent.
D) eventually return to its natural rate of 2 percent inflation and a new lower unemployment rate.
E) stay at the 4 percent inflation rate and the natural unemployment rate will fall.
B
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What will be an ideal response?
Social savings is
A. just another way of defining security. B. the sum of government and private savings. C. government savings only. D. defined by higher rates of interest for the government.