Which of the following is likely the most significant implication of the natural rate of unemployment hypothesis?
A) The natural rate of inflation tends toward zero.
B) Long-run policy should be directed toward controlling inflation rather than unemployment.
C) The natural rate of unemployment can be reduced if policymakers accept worsening inflation.
D) The natural rate of unemployment is consistent only with a zero inflation rate in the long run.

Question

Which of the following is likely the most significant implication of the natural rate of unemployment hypothesis?  
A) The natural rate of inflation tends toward zero. 
B) Long-run policy should be directed toward controlling inflation rather than unemployment. 
C) The natural rate of unemployment can be reduced if policymakers accept worsening inflation. 
D) The natural rate of unemployment is consistent only with a zero inflation rate in the long run.

Quizplus · Accepted Answer

The natural rate of unemployment hypothesis suggests that there is a certain level of unemployment that will always exist in the economy, even in the absence of cyclical fluctuations. Long-run policy should therefore focus on controlling inflation rather than trying to push unemployment below its natural rate, as doing so would likely lead to higher inflation in the long run.

Which of the Following Is Likely the Most Significant Implication