Listed below are four macroeconomic theories. Which of the four are most closely

Question

Listed below are four macroeconomic theories. Which of the four are most closely tied to the assumptions necessary for the results predicted by the natural rate hypothesis?

Listed below are four macroeconomic theories. Which of the four are most closely tied to the assumptions necessary for the results predicted by the natural rate hypothesis? Classical macroeconomics, since the key concerns of the natural rate hypothesis are based on a vertical short-run aggregate supply curve Rational expectations, since the key concern of the natural rate hypothesis is that people will begin to expect the inflation incurred by attempts to keep the unemployment rate below the natural rate, resulting in an accelerating rate of inflation necessary to do so Real business cycle theory since the ultimate goal of the natural rate hypothesis was a low natural rate of unemployment, its proponents encouraged low tax rates to entrepreneurs, encouraging investment in technology research and development (which would ultimately lead to more jobs and less unemployment) Political business cycle theory -the natural rate hypothesis was warning about the consequences of the same short periods of economic growth just before elections (and subsequent painful returns to the status quo) that concerned political business cycle theorists

Explanation / Answer

Rational expectations and real businees cycle theory are most closely tied.

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