According to the natural rate hypothesis, what can government policymakers influence?
A) stable interest rates and a stable money supply in the long run, but NOT in the short run
B) stable interest rates and a stable money supply in the short run, but NOT in the long run
C) the trade-off between inflation and unemployment in the long run, but NOT in the short run
D) the trade-off between inflation and unemployment in the short run. but NOT in the long run

Question

According to the natural rate hypothesis, what can government policymakers influence?  
A) stable interest rates and a stable money supply in the long run, but NOT in the short run 
B) stable interest rates and a stable money supply in the short run, but NOT in the long run 
C) the trade-off between inflation and unemployment in the long run, but NOT in the short run 
D) the trade-off between inflation and unemployment in the short run. but NOT in the long run

Quizplus · Accepted Answer

The natural rate hypothesis suggests that government policymakers can influence the trade-off between inflation and unemployment in the short run through monetary and fiscal policies, but in the long run, the economy tends to return to the natural rate of unemployment, making such trade-offs temporary.

According to the Natural Rate Hypothesis, What Can Government Policymakers