The rate of unemployment below which the rate of inflation tends to rise and above which the rate of inflation tends to fall is called.
A)structural unemployment.
B)extraneous inflation rate.
C)the unemployment rate.
D)the NAIRU.

Question

Quizplus · Accepted Answer

The NAIRU stands for Non-Accelerating Inflation Rate of Unemployment. It is the rate of unemployment below which the rate of inflation tends to rise and above which the rate of inflation tends to fall. The concept of the NAIRU suggests that there is a natural rate of unemployment in the economy that will not exert upward nor downward pressure on inflation. When the unemployment rate is below the NAIRU, wages and prices tend to rise, causing inflation. When the unemployment rate is above the NAIRU, wages and prices tend to fall, leading to deflation. Therefore, the NAIRU is a crucial consideration in monetary policy as central banks try to maintain inflation at a stable and low level.

The Rate of Unemployment Below Which the Rate of Inflation