Which of the following statements is not correct with reference to the Non- Accelerating Inflation rate of unemployment (NAIRU)?a)It is the highest unemployment rate in an economy without causing wages growth and inflation to rise.b)NAIRU only account for the impact of inflation on unemployment in an economy.c)The economy operates above its full capacity when the unemployment rate is lower than the NAIRU.d)It help in assessing the spare capacity in the economy.Correct answer is option 'A'. Can you explain this answer?

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Which of the following statements is not correct with reference to the Non- Accelerating Inflation rate of unemployment (NAIRU)?

a)
It is the highest unemployment rate in an economy without causing wages growth and inflation to rise.
b)
NAIRU only account for the impact of inflation on unemployment in an economy.
c)
The economy operates above its full capacity when the unemployment rate is lower than the NAIRU.
d)
It help in assessing the spare capacity in the economy.

Correct answer is option 'A'. Can you explain this answer?

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Which of the following statements is not correct with reference to the...

The NAIRU is the lowest unemployment rate that can be sustained without causing wages growth and inflation to rise. Hence option (a) is the correct answer.

When unemployment is at the NAIRU level, inflation is steady; when unemployment rises, inflation decreases; when unemployment drops, inflation increases. With no set formula to determine NAIRU, the Federal Reserve has historically used statistical models to put the NAIRU level somewhere between 5% and 6% unemployment On the downside, NAIRU does not account for the variety of factors that impact unemployment, besides inflation; also, the historical connection between inflation and unemployment can break down, rendering NAIRU less effective A key indicator of spare capacity in the economy is the difference between the NAIRU and the unemployment rate – sometimes known as the ̳unemployment rate gap‘ (and also referred to as the ̳unemployment gap‘).

There will be spare capacity in an economy when aggregate demand for goods and services is less than the economy's capacity to produce them. As spare capacity decreases, businesses have difficulty finding enough suitable workers. As a result, businesses may offer higher wages to attract and retain workers, and they may increase the prices of their products to cover their higher labour costs.

If the unemployment rate is higher than the NAIRU, the economy would not be at full employment and there would be downward pressure on inflation If the unemployment rate is lower than the NAIRU, the economy is operating above its full capacity, and there is upward pressure on inflation.

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Which of the following statements is not correct with reference to the Non- Accelerating Inflation rate of unemployment (NAIRU)?a)It is the highest unemployment rate in an economy without causing wages growth and inflation to rise.b)NAIRU only account for the impact of inflation on unemployment in an economy.c)The economy operates above its full capacity when the unemployment rate is lower than the NAIRU.d)It help in assessing the spare capacity in the economy.Correct answer is option 'A'. Can you explain this answer?

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Which of the following statements is not correct with reference to the Non- Accelerating Inflation rate of unemployment (NAIRU)?a)It is the highest unemployment rate in an economy without causing wages growth and inflation to rise.b)NAIRU only account for the impact of inflation on unemployment in an economy.c)The economy operates above its full capacity when the unemployment rate is lower than the NAIRU.d)It help in assessing the spare capacity in the economy.Correct answer is option 'A'. 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 Which of the following statements is not correct with reference to the Non- Accelerating Inflation rate of unemployment (NAIRU)?a)It is the highest unemployment rate in an economy without causing wages growth and inflation to rise.b)NAIRU only account for the impact of inflation on unemployment in an economy.c)The economy operates above its full capacity when the unemployment rate is lower than the NAIRU.d)It help in assessing the spare capacity in the economy.Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following statements is not correct with reference to the Non- Accelerating Inflation rate of unemployment (NAIRU)?a)It is the highest unemployment rate in an economy without causing wages growth and inflation to rise.b)NAIRU only account for the impact of inflation on unemployment in an economy.c)The economy operates above its full capacity when the unemployment rate is lower than the NAIRU.d)It help in assessing the spare capacity in the economy.Correct answer is option 'A'. Can you explain this answer?.

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