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Non-Accelerating Inflation Rate of Unemployment

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Non-Accelerating Inflation Rate of Unemployment
Also called NAIRU. The unemployment rate in an economy below which inflation will begin to rise. The idea behind NAIRU states that a certain unemployment rate is built in to an economy. If unemployment falls too far, the economy will begin to overheat and inflation will rise. This analysis is highly controversial; some economists hold full employment is possible without these negative side effects. Milton Friedman was a major proponent of the NAIRU idea. See also: Phillips curve.


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The level of employment at which inflation does not accelerate - the non-accelerating inflation rate of unemployment or NAIRU - is susceptible to government policies.
However, prolonged and asymmetric episodes of high inflation can occur when policymakers underestimate both the non-accelerating inflation rate of unemployment and the persistence of inflation in the Phillips curve.
Meyer's terrible idea is known as the Non-Accelerating Inflation Rate of Unemployment (NAIRU): the notion that there exists a threshold unemployment rate below which inflation increases without limit.
 
 
 
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