Final answer:
The natural unemployment rate is the rate that the economy tends to return to after a change, and it has an inverse relationship with the inflation rate.
Step-by-step explanation:
The natural unemployment rate is the rate that the economy tends to return to after a change. It is also known as the non-accelerating inflation rate of unemployment (NAIRU). The natural rate of unemployment is determined by structural factors such as technological changes and labor market institutions.
The relationship between the natural unemployment rate and the inflation rate is known as the Phillips curve. It suggests that there is an inverse relationship between the two. When the unemployment rate is below the natural rate, there is upward pressure on wages and prices, leading to higher inflation. Conversely, when the unemployment rate is above the natural rate, there is downward pressure on wages and prices, leading to lower inflation.
In summary, the natural unemployment rate is the rate that the economy tends to adjust back to after a change, and it has an inverse relationship with the inflation rate.