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The natural rate of unemployment is the name that was given to a key concept in the study of economic activity. Milton Friedman and Edmund Phelps, tackling this 'human' problem in the 1960s, both received the Nobel Memorial Prize in Economic Sciences for their work, and the development of the concept is cited as a main motivation behind the prize.
The "natural" rate of unemployment is defined as the rate of unemployment that exists when the labour market is in equilibrium, and there is pressure for neither rising inflation rates nor falling inflation rates.
The unemployment rate (U-6) is a wider measure of unemployment, which treats additional workers as unemployed (e.g., those employed part-time for economic reasons and certain "marginally attached" workers outside the labor force, who have looked for a job within the last year, but not within the last 4 weeks).
Natural rate of unemployment (also known as full employment) – This is the summation of frictional and structural unemployment, that excludes cyclical contributions of unemployment (e.g. recessions) and seasonal unemployment. It is the lowest rate of unemployment that a stable economy can expect to achieve, given that some frictional and ...
The Natural rate of unemployment refers to the rate of unemployment due to structural or supply-side factors alone. Cyclical factors, such as government stimulus or austerity policies, cause the actual unemployment rate to vary around the natural rate. Economists debate the natural rate of unemployment.
Instead, there is a trade-off between unemployment and inflation: a government might choose to attain a lower unemployment rate but would pay for it with higher inflation rates. In essence, in this view, the meaning of “full employment” is really nothing but a matter of opinion based on how the benefits of lowering the unemployment rate ...
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If the economy is said to be at a potential GDP level, the unemployment rate ostensibly equals the NAIRU (the "natural rate of unemployment"). There is great disagreement among economists as to what these rates actually are, while the concept itself of NAIRU is rejected by Post-Keynesians as non-valid. [1] [2] [3]