Question

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

Answer 1

Answer : Natural rate of unemployment means that the rate of unemployment which has been exist in an healthy economy as it means that there exist frictional and structural unemployment.

The Phillips curves shows a wise and logical relationship exist between natural rate of unemployment and rate of inflation.There is an inverse relationship exist between them.As natural level of unemployment decrease and inflation increase.

Deflation is the decrease in the general price level through systematic process in an economy where as disinflation resulted in the process where the rate of change of inflation over certain period of time.