The Natural Rate Hypothesis States That When the Inflation Rate

Multiple Choice

The natural rate hypothesis states that when the inflation rate _______, in the short run the unemployment rate ________ and in the long run the unemployment rate ________.

A) rises, decreases; returns to the natural unemployment rate
B) rises, decreases; decreases
C) falls, decreases; decreases
D) falls, decreases; returns to the natural unemployment rate
E) falls, increases; decreases