_____ states that in the long run, the economy tends toward the natural rate of unemployment.
A) The nominal rate hypothesis
B) The real rate hypothesis
C) The natural rate hypothesis
D) The Taylor rule
E) The Phillips curve

Question

Quizplus · Accepted Answer

The natural rate hypothesis states that in the long run, the economy tends toward the natural rate of unemployment, which is the rate of unemployment that exists when the economy is at potential output. The other choices are incorrect: A is not a valid term, B and D do not relate to the long-run tendency of the economy, and E is related to the short-run tradeoff between inflation and unemployment.

_____ States That in the Long Run, the Economy Tends