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Economics (AS & A Level) · Feb / March 2021 · Paper 32 · Question 29

9708Links between macroeconomic problems and their interrelatedness

The natural rate of unemployment in an economy is 5%. What will happen if a government persists in trying to achieve a target rate of unemployment of 3% by expansionary monetary policy?

  1. Aan accelerating rate of inflation
  2. Ba diminishing rate of inflation
  3. Ca high but constant rate of inflation
  4. Da negative rate of inflation

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Correct answer: A. an accelerating rate of inflation

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