Chapter 6R, Problem 24MCQ

To determine

To find:

Definition of natural rate hypothesis.

Explanation of Solution

The essential premise of the natural rate theory is that there is a certain unemployment equilibrium level. Since Milton Friedman himself stated that we "cannot know what the "natural" rate is," the main argument against a "natural rate" is that there is no solid evidence to support it. The essential premise of the natural rate theory is that there is a certain unemployment equilibrium level.

Thus, from the above we can conclude that the correct option is A.