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Unemployment Short Questions (250 words max) 1. What are the main differences between the 'natural rate of unemployment' and the 'NAIRU' hypotheses? The main differences between the two concepts relate to the fact that they belong to different models; the Friedman's or the Neo-Classical model (the natural rate of unemployment) and the imperfect competition model developed by New Keynesian economists (NAIRU). The existence of the differences between the NAIRU and the natural rate of unemployment, hence, depends on the theoretical perspective. For the Monetarist and Neo-Classical economists, the two concepts are identical because the economy is always at full employment. From the New Keynesian perspective, however, the equilibrium can settle at a level below the full employment; thus making the natural rate of unemployment a special case of NAIRU that occurs at full employment. In both models, there is a point, at which the level of inflation is constant, that is it is possible...

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