non-accelerating inflation rate of unemployment (NAIRU)

• The natural rate of unemployment refers to
  ?

• the level of unemployment at which there is no cyclical unemployment.

  • This is where the economy has reached full employment,
  • and where the supply of labour equals the demand of labour

• When an demand begins to exceed full employment cost-push inflation occurs

  • because labour becomes scarce and wages must increase to attract workers
    • (away from their current positions, to other firms)

• These increased costs will be passed on by firms to consumers and cause inflation across the economy.

• The NAIRU represents
  ?

• the lowest unemployment rate which can be sustained without an increase in inflation.

  • Recently, Australia lowered the NAIRU estimate from 5% to 4.5%

• When unemployment is at the NAIRU, ==it is considered full employment==

  • i.e. no cyclical unemployment???