please help Question 46 Not yet answered Points out of 1 P F

please help

Question 46 Not yet answered Points out of 1 P Flag question If the NAIRU was 4.8% in 2002 and the actual unemployment rate was 5.8%, what percentage of the labor force could have been put to work without exerting upward pressure on inflation? Select one: a. 196 b. 1.2% c. 5.396 d. 10.696

Solution

the inflation in a given period as calculated by the Philip curve is the summation of last year\'s inflation (a proxy for expected inflation) and the difference between actual and the NAIRU. In order to keep the inflation rate same as the past year\'s inflation (as demanded by the question), we must ensure that the unemployment rate in the economy is equal to the NAIRU. Here the unemployment rate us 5.8% while NAIRU is 4.8%, so we can reduce the unemployment rate by 1% to bring no inflation. Thus 1% of the labour force can be employed without putting pressure on inflation. So, (a)