How might you distinguish between these two hypotheses

Reference no: EM131141932

The United States at the end of the 1990s witnessed rapid growth in real income and historically low rates of unemployment. Suppose two hypotheses for this decline are offered. The first is that productivity has increased owing to new technologies and that the natural rate of unemployment has fallen. The second is that the economy has been in a cyclical boom and unemployment has fallen well below the natural rate. How might you distinguish between these two hypotheses? Do they have different implications for inflation?

Reference no: EM131141932

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