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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