Economics Phillips Curve Questions
The concept of the non-accelerating inflation rate of unemployment (NAIRU) refers to the level of unemployment at which inflation remains stable or constant. It represents the lowest level of unemployment that an economy can sustain without causing inflation to accelerate. When the unemployment rate falls below the NAIRU, there is upward pressure on wages and prices, leading to inflationary pressures. Conversely, when the unemployment rate is above the NAIRU, there is downward pressure on wages and prices, potentially leading to deflationary pressures. The NAIRU is influenced by various factors such as labor market conditions, productivity, and inflation expectations.