if policy makers estimate the natural rate of unemployment incorrectly, group of answer choices their policies will cause deflation in the long run. their policies will cause even more unemployment in the long run. the economy will stay below its potential gdp in the long run. the economy will tend toward the level of unemployment the policy makers believe is correct. the policies that appear to be successful in the short run will lead to inflation in the long run. previousnext

Public policy can have a significant impact on the natural rate of unemployment.Public assistance programs for the unemployed can have an impact on how keen people are to pursue work on the supply side of the labor market.

Unemployment has four basic causes: cyclical, seasonal, frictional, and structural.When the business cycle contracts, there is a general decline in macroeconomic activity, which leads to cyclical unemployment.

The demand-side and supply-side strategies for lowering unemployment are the two basic methods.Recession-induced increases in cyclical unemployment are referred to as demand-deficient unemployment and are addressed by demand-side strategies.

Managing output and employment through increased government expenditure and decreased taxation is the aim of an expansionary fiscal policy.Higher levels of disposable income and more consumption result from lower tax rates.

Consumption growth raises overall demand, which raises gross domestic product (GDP).In response to rising demand and GDP, businesses will boost production, which calls for hiring additional personnel.

As a result, cyclical unemployment will decline.Additionally, because businesses continue to operate, there are fewer job losses when there is robust economic growth and higher aggregate demand.

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