Suppose a policy lowers the natural rate of unemployment.What is the effect of such a policy change?

Question

Quizplus · Accepted Answer

Lowering the natural rate of unemployment will ultimately shift the long-run Phillips curve to the left because the natural rate of unemployment is a key determinant for this curve. When the natural rate of unemployment decreases, it means that the economy can achieve lower levels of unemployment without causing inflation. This will lead to a decrease in the rate of inflation for any given level of unemployment, shifting the Phillips curve to the left.

Suppose a Policy Lowers the Natural Rate of Unemployment