Question

The NAIRU is the rate of unemployment at​ which:

A.
the inflation rate is constant.
B.
unemployment is zero.
C.
prices are constant.
D.
All of the above are correct.

Answer 1

a. The inflation rate is constant.

Step-by-step explanation:

In the earlys of the xx century, Phillips developed a curve which linked a negative relation between unemployement rate and inflation. Over the time, the predictions of the curve failed, and that is how a new theoretical approach came across. The NAIRU (Non-Accelerating Inflation Rate of Unemployment) defines a unemployement rate where the inflation rate is constant, rejecting the traditional assumptions of the Phillips's curve.

Please take a look to the attached graph to understand the concept.