According to monetarists,the natural rate theory
A)denies the tradeoff between inflation and output.
B)argues that there is a stable tradeoff between inflation and output.
C)shows that activist policies work best.
D)believes that the Phillips curve relationship breaks down when policymakers attempt to use it.

Question

Quizplus · Accepted Answer

Monetarists, particularly those following Milton Friedman's views, argue that the Phillips curve relationship, which suggests a trade-off between inflation and unemployment (or output), breaks down in the long run when policymakers attempt to exploit it for short-term gains. They believe that any attempt to lower unemployment below the natural rate by increasing inflation only leads to higher inflation in the long run without reducing unemployment, thus denying a stable trade-off between inflation and output.

According to Monetarists,the Natural Rate Theory