Non-Accelerating Inflation Rate of Unemployment (NAIRU): [Essay Example], 324 words GradesFixer
exit-popup-close

Haven't found the right essay?

Get an expert to write your essay!

exit-popup-print

Professional writers and researchers

exit-popup-quotes

Sources and citation are provided

exit-popup-clock

3 hour delivery

exit-popup-persone
close
This essay has been submitted by a student. This is not an example of the work written by professional essay writers.

Non-Accelerating Inflation Rate of Unemployment (NAIRU)

Print Download now

Pssst… we can write an original essay just for you.

Any subject. Any type of essay.

We’ll even meet a 3-hour deadline.

Get your price

121 writers online

blank-ico
Download PDF

NAIRU, which is the non-accelerating inflation rate of unemployment represents the rate of unemployment at whish inflation will stabilise. The NAIRU theory was used to explain the stagflation phenomenon of the 1970’s when the Phillips Curve could not . According to the theory it is explainable why there is a simulataneous high unemployment and high inflation because workers can change their inflation expectations , therefore increasing the prevailing rate of inflation. This situation changed the idea that the Phillips curve is a stable and good predictable policy tool.

However there is a trade-off between inflation and unemployment in the short-run. As ouptput increses , unemployment decreases , therefore the spending within the economy will increase and the price levels will increase consequently.Moreover , according to economists ,it cannot be a trade-off between inflation and unemployment in the long run . An increase in unemployment can lead to a decrease in inflation only on the short run. Thus , in the long run , inflation and unemployment are not connected.

The reason why in the short-run , the curve shifts is due to changes in inflation which occurs when workers will realise when their nominal wage will change if inflation increases as real wages decrease as a consequence. As such they will ask for a higher nominal wage in order to keep unchanged their real wage , causing the production costs to increase and the profits to decrease.

As the matter of exploiting the Phillips Curve ,it became accepted the fact that policy-makers can exploit the trade off between unemployment and inflation because more unemployment means less inflation. The short-run Phillips curve depicts the relationship between inflation and unemploymanet rates. The long run Phillips curve is a vertical line that shows there isn’t a constant trade-off between inflation and unemployment whereas the short run Phillips curve iis differently shaped, looking like an L .As unemployment rates becomes smaller , inflation increases and vice-versa.

Remember: This is just a sample from a fellow student.

Your time is important. Let us write you an essay from scratch

100% plagiarism free

Sources and citations are provided

Cite this Essay

To export a reference to this article please select a referencing style below:

GradesFixer. (2018, October, 26) Non-Accelerating Inflation Rate of Unemployment (NAIRU). Retrived February 28, 2020, from https://gradesfixer.com/free-essay-examples/non-accelerating-inflation-rate-of-unemployment-nairu/
"Non-Accelerating Inflation Rate of Unemployment (NAIRU)." GradesFixer, 26 Oct. 2018, https://gradesfixer.com/free-essay-examples/non-accelerating-inflation-rate-of-unemployment-nairu/. Accessed 28 February 2020.
GradesFixer. 2018. Non-Accelerating Inflation Rate of Unemployment (NAIRU)., viewed 28 February 2020, <https://gradesfixer.com/free-essay-examples/non-accelerating-inflation-rate-of-unemployment-nairu/>
GradesFixer. Non-Accelerating Inflation Rate of Unemployment (NAIRU). [Internet]. October 2018. [Accessed February 28, 2020]. Available from: https://gradesfixer.com/free-essay-examples/non-accelerating-inflation-rate-of-unemployment-nairu/
close

Sorry, copying is not allowed on our website. If you’d like this or any other sample, we’ll happily email it to you.

By clicking “Send”, you agree to our Terms of service and Privacy statement. We will occasionally send you account related emails.

close

Thanks!

Your essay sample has been sent.

Want us to write one just for you? We can custom edit this essay into an original, 100% plagiarism free essay.

thanks-icon Order now
boy

Hi there!

Are you interested in getting a customized paper?

Check it out!
Having trouble finding the perfect essay? We’ve got you covered. Hire a writer

GradesFixer.com uses cookies. By continuing we’ll assume you board with our cookie policy.