The _____ hypothesis is that macroeconomic policy should be used to stabilize the economy rather than to permanently decrease the unemployment rate.
A) natural rate
B) political business cycle
C) rational expectations
D) real business cycle

Question

Quizplus · Accepted Answer

The natural rate hypothesis states that there is a certain level of unemployment that cannot be changed by macroeconomic policy without causing inflation. Therefore, the focus of macroeconomic policy should not be on permanently decreasing the unemployment rate, but on stabilizing the economy to avoid fluctuations around the natural rate. The other options (B, C, D) are not directly related to this hypothesis.

The _____ Hypothesis Is That Macroeconomic Policy Should Be Used