According to the natural rate hypothesis, in the short run an increase in the inflation rate brings
A)no change in the unemployment rate.
B)an increase in the natural unemployment rate.
C)a decrease in the unemployment rate.
D)a decrease in the natural unemployment rate.
E)an increase in the unemployment rate.

Question

Quizplus · Accepted Answer

The natural rate hypothesis suggests that in the short run, an increase in the inflation rate can lead to a decrease in the unemployment rate due to the Phillips curve relationship, where inflation and unemployment are inversely related.

According to the Natural Rate Hypothesis, in the Short Run