How is a decrease in the natural rate of unemployment shown in the Phillips curve diagram? Does this decrease change the inflation rate?

Natural Rate

The rate of output at which an economy operates without inflationary pressures, often referred to as the natural rate of unemployment.

Phillips Curve

A concept in economics that indicates an inverse relationship between the rate of unemployment and the rate of inflation within an economy.

Inflation Rate

The rise in the average cost of goods and services throughout an economy over a specified period.

Describe the movements in the short-run and long-run Phillips curves and their significance.
Describe the concept of natural unemployment rate and its importance within the framework of economics.

Verified Answer

Final Answer :

Both the long-run and the short-run Phillips curves shift left. There is no change in the inflation rate.

Learning Objectives

Describe the movements in the short-run and long-run Phillips curves and their significance.
Describe the concept of natural unemployment rate and its importance within the framework of economics.