The flaw of the Friedman model of the business cycle is that it
A)assumes away output fluctuations.
B)assumes complete wage rigidity.
C)assumes unrealistic fooling of workers.
D)requires procyclical wage movements and continuous labor market equilibrium.

Question

Quizplus · Accepted Answer

The Friedman model of the business cycle, particularly in its incorporation of the "natural rate of unemployment" and expectations-augmented Phillips Curve, is often criticized for assuming that workers can be systematically fooled by inflation into supplying more labor than they otherwise would, which many find to be an unrealistic assumption over the long term.

The Flaw of the Friedman Model of the Business Cycle