Suppose that the natural rate of unemployment in the economy is 5% and that the current unemployment rate is 3.5%.

Which statement would be most consistent with the information above?

Select one:

a.

The aggregate demand curve at the current level of unemployment would lie above the aggregate demand curve when unemployment is at the natural rate. Consequently, there would be upward pressure on inflation.

b.

The aggregate demand curve at the current level of unemployment would lie above the aggregate demand curve when unemployment is at the natural rate. Consequently, the Phillips curve shifts upward.

c.

The aggregate demand curve at the current level of unemployment would lie above the aggregate demand curve when unemployment is at the natural rate. Consequently, there would be a negative bargaining gap.

d.

The aggregate demand curve at the current level of unemployment would lie below the aggregate demand curve when unemployment is at the natural rate. Consequently, there would be downward pressure on the policy rate.