An important implication of the natural rate hypothesis is that the government policy that results in low inflation is generally the optimal long-run policy
A)only if there is no cyclical unemployment in the short run
B)only if there is no structural unemployment in the short run
C)regardless of concerns about unemployment
D)regardless of concerns about currency exchange rates
E)only if the dollar's exchange rate is stable

Question

Quizplus · Accepted Answer

The natural rate hypothesis states that over the long run, the unemployment rate will tend towards the "natural rate" that is determined by structural factors and not affected by government policy. Therefore, the optimal long-run policy is one that results in low inflation, regardless of concerns about unemployment or currency exchange rates.

An Important Implication of the Natural Rate Hypothesis Is That