The natural rate of unemployment hypothesis was advocated by

Milton Friedman

A. W. Phillips

J. M. Keynes

R. G. Lipsey

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This question was previously asked in

UPSC CDS-2 – 2018

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The correct answer is Milton Friedman.

The natural rate of unemployment hypothesis was prominently advocated by Milton Friedman and Edmund Phelps in the late 1960s. It posits that there is a specific level of unemployment consistent with a stable rate of inflation, influenced by structural and frictional factors in the labor market.

This hypothesis challenged the conventional view derived from the simple Phillips curve which suggested a stable trade-off between inflation and unemployment. Friedman argued that attempts to keep unemployment below its natural rate through expansionary policies would only lead to accelerating inflation without a permanent reduction in unemployment.

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