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Consider the following statements about the non-accelerating Inflation rate of unemployment.
1. The NAIRU is that rate of unemployment which is consistent with a constant rate of inflation.
2. The upward and downward forces on price and wage neutralise each other and there is no tendency of change in the rate of inflation.
Which of these statements is/are correct?
- a)1 Only
- b)2 Only
- c)Both 1 and 2
- d)None of them
Correct answer is option 'C'. Can you explain this answer?
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Most Upvoted Answer
Consider the following statements about the non-accelerating Inflatio...
Explanation:
Non-Accelerating Inflation Rate of Unemployment (NAIRU) is the rate of unemployment at which the rate of inflation remains constant.
Statement 1: The NAIRU is that rate of unemployment which is consistent with a constant rate of inflation.
This statement is correct. NAIRU is the rate of unemployment at which the rate of inflation remains constant. It represents the equilibrium level of unemployment in an economy. When the actual rate of unemployment is below the NAIRU, the economy is operating at a level of output above its potential and there is upward pressure on prices. On the other hand, when the actual rate of unemployment is above the NAIRU, the economy is operating at a level of output below its potential and there is downward pressure on prices. Thus, the NAIRU represents the rate of unemployment at which the forces of supply and demand in the labor market are in balance and there is no upward or downward pressure on prices.
Statement 2: The upward and downward forces on price and wage neutralize each other and there is no tendency of change in the rate of inflation.
This statement is also correct. The NAIRU represents the equilibrium level of unemployment in an economy, where the upward and downward forces on prices and wages are in balance. At this level of unemployment, there is no tendency for the rate of inflation to change. If the actual rate of unemployment is above the NAIRU, there is downward pressure on prices and wages, which helps to bring the rate of inflation down. Conversely, if the actual rate of unemployment is below the NAIRU, there is upward pressure on prices and wages, which puts upward pressure on the rate of inflation. Thus, the NAIRU represents the level of unemployment at which there is no tendency for the rate of inflation to change.
Conclusion:
Both the statements are correct. The NAIRU represents the rate of unemployment at which the rate of inflation remains constant, and at this level of unemployment, the upward and downward forces on prices and wages are in balance, which neutralizes each other, and there is no tendency for the rate of inflation to change.
Non-Accelerating Inflation Rate of Unemployment (NAIRU) is the rate of unemployment at which the rate of inflation remains constant.
Statement 1: The NAIRU is that rate of unemployment which is consistent with a constant rate of inflation.
This statement is correct. NAIRU is the rate of unemployment at which the rate of inflation remains constant. It represents the equilibrium level of unemployment in an economy. When the actual rate of unemployment is below the NAIRU, the economy is operating at a level of output above its potential and there is upward pressure on prices. On the other hand, when the actual rate of unemployment is above the NAIRU, the economy is operating at a level of output below its potential and there is downward pressure on prices. Thus, the NAIRU represents the rate of unemployment at which the forces of supply and demand in the labor market are in balance and there is no upward or downward pressure on prices.
Statement 2: The upward and downward forces on price and wage neutralize each other and there is no tendency of change in the rate of inflation.
This statement is also correct. The NAIRU represents the equilibrium level of unemployment in an economy, where the upward and downward forces on prices and wages are in balance. At this level of unemployment, there is no tendency for the rate of inflation to change. If the actual rate of unemployment is above the NAIRU, there is downward pressure on prices and wages, which helps to bring the rate of inflation down. Conversely, if the actual rate of unemployment is below the NAIRU, there is upward pressure on prices and wages, which puts upward pressure on the rate of inflation. Thus, the NAIRU represents the level of unemployment at which there is no tendency for the rate of inflation to change.
Conclusion:
Both the statements are correct. The NAIRU represents the rate of unemployment at which the rate of inflation remains constant, and at this level of unemployment, the upward and downward forces on prices and wages are in balance, which neutralizes each other, and there is no tendency for the rate of inflation to change.
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Consider the following statements about the non-accelerating Inflatio...
- The NAIRU is that rate of unemployment which is consistent with a constant rate of inflation. It means at NAIRU, the upward and downward forces on price (inflation) and wage (unemployment) neutralise each other and there is no tendency of change in the rate of inflation.
- We may say that the NAIRU is the lowest unemployment rate that an economy can sustain without any upward pressure on the inflation rate.
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Consider the following statements about the non-accelerating Inflation rate of unemployment.1. The NAIRU is that rate of unemployment which is consistent with a constant rate of inflation.2. The upward and downward forces on price and wage neutralise each other and there is no tendency of change in the rate of inflation.Which of these statements is/are correct?a) 1 Onlyb) 2 Onlyc) Both 1 and 2d) None of themCorrect answer is option 'C'. Can you explain this answer?
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Consider the following statements about the non-accelerating Inflation rate of unemployment.1. The NAIRU is that rate of unemployment which is consistent with a constant rate of inflation.2. The upward and downward forces on price and wage neutralise each other and there is no tendency of change in the rate of inflation.Which of these statements is/are correct?a) 1 Onlyb) 2 Onlyc) Both 1 and 2d) None of themCorrect answer is option 'C'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements about the non-accelerating Inflation rate of unemployment.1. The NAIRU is that rate of unemployment which is consistent with a constant rate of inflation.2. The upward and downward forces on price and wage neutralise each other and there is no tendency of change in the rate of inflation.Which of these statements is/are correct?a) 1 Onlyb) 2 Onlyc) Both 1 and 2d) None of themCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements about the non-accelerating Inflation rate of unemployment.1. The NAIRU is that rate of unemployment which is consistent with a constant rate of inflation.2. The upward and downward forces on price and wage neutralise each other and there is no tendency of change in the rate of inflation.Which of these statements is/are correct?a) 1 Onlyb) 2 Onlyc) Both 1 and 2d) None of themCorrect answer is option 'C'. Can you explain this answer?.
Consider the following statements about the non-accelerating Inflation rate of unemployment.1. The NAIRU is that rate of unemployment which is consistent with a constant rate of inflation.2. The upward and downward forces on price and wage neutralise each other and there is no tendency of change in the rate of inflation.Which of these statements is/are correct?a) 1 Onlyb) 2 Onlyc) Both 1 and 2d) None of themCorrect answer is option 'C'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements about the non-accelerating Inflation rate of unemployment.1. The NAIRU is that rate of unemployment which is consistent with a constant rate of inflation.2. The upward and downward forces on price and wage neutralise each other and there is no tendency of change in the rate of inflation.Which of these statements is/are correct?a) 1 Onlyb) 2 Onlyc) Both 1 and 2d) None of themCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements about the non-accelerating Inflation rate of unemployment.1. The NAIRU is that rate of unemployment which is consistent with a constant rate of inflation.2. The upward and downward forces on price and wage neutralise each other and there is no tendency of change in the rate of inflation.Which of these statements is/are correct?a) 1 Onlyb) 2 Onlyc) Both 1 and 2d) None of themCorrect answer is option 'C'. Can you explain this answer?.
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