Answer to Question #184585 in Macroeconomics for Divesh Kalloo

Question

What is NAIRU

Answer 1

NAIRU – Non-accelerating Inflation rate of Unemployment. This is the level of unemployment that is consistent with no acceleration in the inflation rate. The NAIRU is related to the short-run Phillips Curve. If unemployment rises, inflation falls. If unemployment falls, there will come a point, where inflation starts to increase.