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Inflation rate to accelerate if actual unemployment rate declined

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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?

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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 ...

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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.

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Aggregate Supply/Demand Diagram: Unemployment Example

A) 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 and remained at that low level for a year or longer? Explain your answer in a few sentences.

B) Draw an AS/AD diagram illustrating your answer to part (A) That is, draw an AS/AD diagram which shows what happens as an economy operates for a sustained time at a level of actual unemployment that is lower than the unemployment level at potential RGDP. Be sure to label all lines and axes in your diagram clearly.

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