A macroeconomic model obeys the "natural rate hypothesis" by incorporating
A)the assumption of nominal wage stickiness.
B)a vertical LAS curve.
C)imperfect information.
D)a vertical AD curve.

Question

Quizplus · Accepted Answer

The natural rate hypothesis suggests that in the long run, the economy will tend towards an equilibrium in which the output is at its potential level, which is determined by the supply side of the economy. This is represented by a vertical LAS (long-run aggregate supply) curve in a macroeconomic model.

A Macroeconomic Model Obeys the "Natural Rate Hypothesis" by Incorporating