AP MacroeconomicsUnemployment & Inflation
Natural Rate of Unemployment
The natural rate of unemployment is the lowest level of unemployment that can be sustained without causing inflation to rise.
The natural rate of unemployment is the sum of frictional and structural unemployment. It represents the level of unemployment that exists even when the economy is operating at full capacity. If unemployment falls below the natural rate, it can lead to upward pressure on wages and prices, potentially causing inflation.
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