According to the natural rate hypothesis,the economy tends toward
A)the natural rate of unemployment in the long run
B)the natural rate of unemployment in the short run
C)potential output in the short run
D)zero inflation in the long run
E)a stable tradeoff between inflation and unemployment in the long run

Question

Quizplus · Accepted Answer

The natural rate hypothesis states that the economy tends towards the natural rate of unemployment in the long run. This is because in the long run, prices and wages are flexible and can adjust to market conditions, leading to full employment of resources and the natural rate of unemployment.

According to the Natural Rate Hypothesis,the Economy Tends Toward