Suppose the economy is self-regulating and the (actual) unemployment rate is les

Question

Suppose the economy is self-regulating and the (actual) unemployment rate is less than the natural unemployment rate. This means that the economy is producing a level of output
a. above its naturel level and will eventually cut back on output
b. below its natural level and will eventually increase output
c. below its natural level but no forces exist to automatically increase output
d. above its natural level and institutional constraints will automatically be reduced so as
to allow the economy to continue producing this level
e. none of the above

Explanation / Answer

a. above its naturel level and will eventually cut back on output

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