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Suppose that a country's central bank has an inflation target of 2-3%. Why might very low unemployment figures prevent the central bank from meeting its
Suppose that a country's central bank has an inflation target of 2-3%. Why might very low unemployment figures prevent the central bank from meeting its target? When the unemployment rate is lower than the natural rate, the natural rate is likely to be wrongly estimated. When the unemployment rate is lower than the natural rate, the economy is always in a recession. When the unemployment rate is lower than the natural rate, deflation is more likely to happen. When the unemployment rate is lower than the natural rate, there is likely to be upward pressure on wages. When the unemployment rate is lower than the natural rate, economic growth is likely to slow down
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