- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 11. Understanding Business Cycles
- Subject 7. Inflation
CFA Practice Question
If actual unemployment falls below the NAIRU, theory suggests that ______
B. demand-pull inflation may occur.
C. the actual unemployment rate will be higher than the natural rate of unemployment.
A. cost-push inflation may occur.
B. demand-pull inflation may occur.
C. the actual unemployment rate will be higher than the natural rate of unemployment.
Correct Answer: A
In this case, the balance of power in the labour market tends to switch to employees rather than employers.
User Contributed Comments 3
| User | Comment |
|---|---|
| johntan1979 | The consequence of this shift: the economy experiences acceleration in pay settlements and the growth of average earnings. Ceteris paribus, an increase in wage inflation will cause a rise in cost-push inflationary pressure. |
| schweitzdm | If actual unemployment falls below the NAIRU, does this mean the rate of wage inflation is unstable? |
| FozzeyBear | i hate you johntan1979 |