Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 35 - Part XII - The Short-Run Trade-Off between Inflation and Unemployment - Questions for Review: 3

Answer

The natural rate of unemployment (NARU) is natural because monetary policy does not impact it in the long run. In the short run the economy will move along the curve but in the long run the unemployment rate returns to the natural rate no matter the inflation rate.

Work Step by Step

This question tests your knowledge of the long run. Unemployment will be manipulated in the short run but in the long run will return to its natural rate .
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