The natural rate hypothesis argues that the economy will:
A) self-correct to the natural rate of inflation.
B) require expansionary fiscal policy to reach the natural rate of unemployment.
C) self-correct to the natural rate of unemployment.
D) require expansionary monetary policy to reach the natural rate of unemployment.

Question

Quizplus · Accepted Answer

The natural rate hypothesis argues that, in the long run, the economy will self-correct to the natural rate of unemployment, which is the rate of unemployment consistent with stable inflation. Therefore, choice C is the correct answer, as it correctly identifies the self-correction to the natural rate of unemployment.

The Natural Rate Hypothesis Argues That the Economy Will