According to Milton Friedman, any divergence in unemployment from its natural rate is
Temporary because
A) anticipated price changes affect nominal wages in the short run but workers will rectify this over time.
B) unanticipated price changes affect real wages in the short run but workers will rectify this over time.
C) anticipated price changes affect real wages in the short run but workers will rectify this over time.
D) unanticipated price changes create inflation which is addressed by policymakers over time.

Question

Quizplus · Accepted Answer

According to Milton Friedman, any divergence in unemployment from its natural rate is temporary because unanticipated price changes affect real wages in the short run but workers will rectify this over time. In other words, if there is an unexpected increase in prices, employers may initially respond by increasing nominal wages to maintain employees' real wages. However, over time, workers will adjust their expectations and accept lower real wages, which will ultimately lead to a return to the natural rate of unemployment.

According to Milton Friedman, Any Divergence in Unemployment from Its