At the natural rate of unemployment, inflationary pressures are nonexistent.

Question

Quizplus · Accepted Answer

The natural rate of unemployment is the rate at which there is no cyclical unemployment, or unemployment caused by economic downturns, but only frictional and structural unemployment. At this level of unemployment, there is no excess demand for labor, and therefore no upward pressure on wages and prices, which would cause inflation to rise. So, inflationary pressures are indeed nonexistent at the natural rate of unemployment.

At the Natural Rate of Unemployment, Inflationary Pressures Are Nonexistent