The natural rate hypothesis argues that ?
Correct answer: A. in the long run the unemployment rate returns to the natural rate, regardless of inflation
- A. in the long run the unemployment rate returns to the natural rate, regardless of inflation
- B. Unemployment is always below the natural rate
- C. Unemployment is always above the natural rate
- D. Unemployment is always equal to the natural rate
Explanation
The natural-rate hypothesis states that monetary or inflation changes may affect unemployment temporarily, but in the long run unemployment returns to its natural rate. Thus, the long-run unemployment rate is independent of the inflation rate.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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