The FED used the concept of NAIRU as a policy guide in its fight to control inflation. Explain NAIRU and how it is derived from the Inflation-Expectations Phillips Curve. Underlying NAIRU is the concept of Bargaining Power. Explain the factors that influence BP, and how this relates to the instability of NAIRU.

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NAIRU stands for NonAccelerating Inflation Rate of Unemployment It represents the unemployment rate at which inflation remains stable over time The concept suggests that there is a tradeoff between un... View the full answer