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    Question

    What is the concept of the "natural rate of

    unemployment" in relation to the Phillips curve?
    A The lowest possible unemployment rate that can be achieved in an economy. Correct Answer Incorrect Answer
    B The unemployment rate that corresponds to zero inflation Correct Answer Incorrect Answer
    C The unemployment rate that occurs when the economy is in a recession. Correct Answer Incorrect Answer
    D The unemployment rate that leads to maximum economic growth Correct Answer Incorrect Answer
    E The unemployment rate that exists when the economy is at full employment Correct Answer Incorrect Answer

    Solution

    According to the Phillips Curve theory, is  Natural Rate of Unemployment (NRU)  is the rate of unemployment when the economy is producing at its potential output (full employment level) and includes joblessness from people transitioning (frictional) or skills mismatch (structural). It is also known as the Non-Accelerating Inflation Rate of Unemployment,  indicating a point where inflation is stable, not accelerating, and the long-run Phillips curve becomes vertical, showing no long-term trade-off between inflation and unemployment .  

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