Principles of Macroeconomics / Unit 10 MAC 0913 short lesson, about 20 seconds
Lowering the Natural Rate
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The idea
If demand policy cannot move long-run unemployment, the neoclassical answer is to move the natural rate instead, by acting on frictional and structural unemployment: job matching, information, training and benefit design.
In practice
Lowering the natural rate raises potential GDP, because more people are working.
Where people slip
A different instrument, on a different quantity, over years rather than quarters.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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