Why would you expect the inflation rate to accelerate if the actual unemployment rate declined to a level lower than the "full employment" unemployment rate (NAIRU)? Explain your answer in a few sentences. What state of business cycles (such as recession, trough, recovery or boom) does the current US economy face, and why?
Inflation & Unemployment Rate
Surprising or the unexpected inflation allows actual unemployment rate to fall below the full employment unemployment rate by temporarily depressing real wages (Chiarella, 2006). Any given labor market structure must involve a certain amount of unemployment, including frictional unemployment associated with individuals changing jobs and possibly classical unemployment arising from real wages being held above the market-clearing level by minimum wage laws, trade unions or other labor market institutions (Storm & Naastepad, 2012). Low supply of free labor will lead to increase in wages, so, it will result into higher disposable income which consequently ...
The expert determines why you would expect the inflation rate to accelerate if the actual unemployment rate decline to a level lower than the "full employment" unemployment rate. The business cycle the current United States economy faces is stated.