The winner of the Nobel Prize for economics in 2006 was Edmund Phelps, who developed the concept of the natural rate of unemployment. His original argument was that the economy will not reach equilibrium until the rate of unemployment reaches its “natural rate.” This natural rate means a rate of unemployment in which all long-run forces work themselves out in the economy and it is in long-run equilibrium. Specifically, Phelps was concerned with the role of inflationary expectations and that these will eventually coincide with the actual rate of inflation. The idea is that there is a rate of unemployment that is in effect an equilibrium rate toward which the economy tends to move. It is not, however, a fixed rate that holds for all time. Phelps argued that the natural rate of unemployment would depend on different factors in different economies.

How is the natural rate of unemployment related to the concept of full employment?