What is natural rate of unemployment
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The natural rate of unemployment is the level of unemployment that exists when the economy is operating at its potential, meaning that there is no cyclical or temporary unemployment. It is also referred to as the non-accelerating inflation rate of unemployment (NAIRU). The natural rate of unemployment is determined by structural factors such as demographics, skills mismatches, and institutional factors such as unemployment benefits and labor market regulations. It is considered an important indicator of the health of an economy and is used by policymakers to guide monetary and fiscal policies.