Assume that the Phillips curve equation is represented by nt

Question

Assume that the Phillips curve equation is represented by nt - nt- 1 = (m + z) - aut . Which of the following will not cause an increase in the natural rate of unemployment?

Quizplus · Accepted Answer

A decrease in z (assuming z represents factors that reduce the natural rate of unemployment) would not cause an increase in the natural rate of unemployment. Instead, it would likely lead to a decrease or no change in the natural rate, contrary to the effects of decreasing a, implementing expansionary monetary or fiscal policies, or increasing m, all of which could increase the natural rate of unemployment by affecting inflation expectations or labor market dynamics.