The natural rate hypothesis suggests that, in the long run, unemployment returns to its natural rate, regardless of inflation.

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The natural rate hypothesis asserts that, in the long term, unemployment will return to its natural rate, which is primarily determined by structural factors like demographics, labor market regulations, and education levels. In the short run, it is possible for monetary and fiscal policies to impact unemployment, but these effects are temporary, and the natural rate is believed to be independent of inflation.

The Natural Rate Hypothesis Suggests That, in the Long Run