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Unemployment, natural rate of. The rate of unemployment corresponding to a general equilibrium, i.e. equilibrium on all markets in the economy, including those for labour. Though this might appear paradoxical, it is therefore the rate of unemployment that would be observed when the economy is at a full-employment equilibrium’. All prices and wage rates have adjusted to the levels at which all markets clear’ supply equals demand in each market in the economy and so any observed unemployment is actually voluntary, as opposed to the involuntary unemployment’ that j. m. keynes was so concerned to explain. It arises because, at the prevailing equilibrium wage rates, some workers prefer to quit, possibly to search for another job that they think will pay a higher wage frictional unemployment). The natural rate of unemployment is a long-run concept: at any particular period of time actual unemployment may differ from it, but it is the rate around which the actual rate moves and to which it would tend in the long run. It is determined by real real
Unit trust terms) elements in the economy consumers’ and workers’ tastes and the efficiency with which search takes place, for example and in particular is independent of purely monetary factors such as the money supply. It follows that in the long run monetary factors influence only nominal values such as the price level and not real values such as output, employment and relative prices. The natural rate of unemployment is therefore a central concept in monetarism.
Unilateral flow bilateral flow.
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