Probably the most significant implication of the natural rate of unemployment hypothesis is that
A)the natural rate of inflation tends toward zero
B)long-run policy should be directed toward controlling inflation rather than unemployment
C)the natural rate of unemployment can be reduced by accepting worsening inflation
D)the natural rate of unemployment is consistent only with a zero inflation rate in the long run
E)tax cuts stimulate the economy and lower inflation

Question

Quizplus · Accepted Answer

The natural rate of unemployment hypothesis suggests that there is a certain level of unemployment that is not related to cyclical factors such as fluctuations in the economy. Therefore, long-run policy should focus on controlling inflation rather than trying to reduce the natural rate of unemployment. This is because attempting to lower unemployment below the natural rate would require policies that could lead to higher inflation.

Probably the Most Significant Implication of the Natural Rate of Unemployment