Final answer:
A fall in the natural rate of unemployment would decrease inflation.
Step-by-step explanation:
A fall in the natural rate of unemployment would decrease inflation. The natural rate of unemployment is the rate of unemployment that exists when the economy is at its potential output and there is no cyclical unemployment. When the natural rate of unemployment falls, it means that there is a higher level of employment in the economy, which can lead to increased production and output.
As more people are employed, there is less slack in the labor market, which puts upward pressure on wages and prices. This can result in higher inflation rates. Conversely, when the natural rate of unemployment is lower, it means that there is less pressure on wages and prices, resulting in lower inflation rates.