Which of the following statements is correct?
A)Milton Friedman's theory of the natural rates of unemployment and output has been highly influential since it describes the limits to the trade-off between inflation and unemployment.
B)Milton Friedman's main concern in advancing the concept of the natural rates of output and unemployment was to illustrate a limitation on monetary policy.
C)Milton Friedman's main concern in advancing the concept of natural rates of output and unemployment was to define a limitation on fiscal policy.
D)Both a and b
E)Both a and c

Question

Quizplus · Accepted Answer

Milton Friedman's theory of the natural rates of unemployment and output states that there is a long-run trade-off between unemployment and inflation and that attempts to push unemployment below its natural rate will only result in higher inflation in the long run. This theory has been influential in shaping monetary policy, as central banks must balance the short-term goals of stabilizing output and employment with the long-term goal of keeping inflation under control. However, Friedman also saw the concept of natural rates as a limitation on monetary policy, as attempts to use monetary policy to push output beyond its natural rate would only result in higher inflation.

Which of the Following Statements Is Correct