If the actual unemployment rate is below the natural rate of unemployment it would be expected that
According to the expectations-augmented Phillips curve, when the actual unemployment rate falls below the natural rate of unemployment (NAIRU), tight labour market…
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If the actual unemployment rate is below the natural rate of unemployment it would be expected that
Answer and explanation
Correct answer A
According to the expectations-augmented Phillips curve, when the actual unemployment rate falls below the natural rate of unemployment (NAIRU), tight labour market conditions and rising aggregate demand create upward pressure on wages and prices, causing the rate of inflation to increase.
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RPSC Senior Teacher Grade II