If the economy is represented in the graph shown and is currently at point E₂, what could be said about the state of the economy? A) There is higher unemployment than the natural rate. B) There is lower unemployment than the natural rate. C) The unemployment rate is just about the natural rate. D) The unemployment rate is zero.

Question

Quizplus · Accepted Answer

Point E₂ is to the right of the long-run Phillips Curve, indicating that there is higher unemployment than the natural rate, which is represented by the point where the short-run Phillips Curve intersects with the long-run one.

If the Economy Is Represented in the Graph Shown and Is