Question

Short answer and typed please.

Explain the natural unemployment rate and its relationship to inflation rate. What is the difference between deflation and disinflation?

Answer 1

Natural unemployment is defined as the minimum unemployment rate resulting from real or voluntary economic forces such as structural change and frictional unemployment. According to the Philips curve there is an inverse relationship between inflation and unemployment. There is a tradeoff between the two in the shortrun.

Deflation means, a decline in the general price level through out the economy, while dis dis inflation means a temporary slow down in price inflation.