CFA Practice Question

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CFA Practice Question

If actual unemployment falls below the NAIRU, theory suggests that ______

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
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