In the long run,
A) attempts to "ﬁne-tune" the economy cause the rate of unemployment to accelerate.
B) there is no inﬂation-unemployment trade-off.
C) there is an inﬂation-unemployment trade-off, and the terms of that trade-off have worsened in recent years.
D) there is an inﬂation-unemployment trade-off, but the terms of that trade-off have improved in recent years.

Question

Quizplus · Accepted Answer

In the long run, according to the economic theory proposed by Milton Friedman and Edmund Phelps, known as the natural rate hypothesis, there is no trade-off between inflation and unemployment. This concept suggests that the economy will adjust to its natural rate of unemployment regardless of inflation in the long run, rendering any inflation-unemployment trade-off temporary and not sustainable over time.

In the Long Run