NAIRU (non-accelerating inflation rate of unemployment)

NAIRU, or the Non-Accelerating Inflation Rate of Unemployment, refers to the specific unemployment rate at which inflation remains stable. When unemployment is above this rate, inflation tends to decrease; when it's below, inflation can rise. Essentially, NAIRU represents a balance where the economy operates effectively without causing prices to accelerate uncontrollably. It highlights the trade-off between unemployment and inflation, suggesting that policy-makers must manage unemployment to maintain price stability and prevent economic fluctuations. Understanding NAIRU helps in making informed decisions about monetary policy and economic interventions.