Help - Confusion regarding the NAIRU (1 Viewer)

[piethepker]

I have attached the passage,

I am confused as to how employment falls below the Nairu. How does an economy fall below the NAIRU if the NAIRU is full employment?

Thanks

 

[shona99]

NAIRU is not necessarily full employment but rather the rate of u/e that occurs with full employment, i.e. u/e will always exist even at full employment because of structural u/e, frictional u/e etc.

So when you say the economy is operating at or below NAIRU, it basically means an increase in this natural rate of u/e or those structurally employed or frictionally unemployed. I hope that makes sense! (and if I'm wrong someone correct me!)