Nairu
Non-accelerating inflation rate of unemployment (NAIRU) is a theoretical level of unemployment below which inflation would be expected to rise. It was first introduced as NIRU (non-inflationary rate of unemployment) by Franco Modigliani and Lucas Papademos in 1975, as an improvement over the "natural rate of unemployment" concept, which was proposed earlier by Milton Friedman.
In the United States, estimates of NAIRU typically range between 5 and 6%. Monetary policy conducted under the assumption of a NAIRU, typically involves allowing just enough unemployment in the economy to prevent inflation rising above a given target figure. Prices are allowed to increase gradually and some unemployment is tolerated.
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