Chapter 18 Terms 101 - Active(discretionary policymaking is...

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Active (discretionary) policymaking - is all actions on the part of monetary and fiscal policymakers that are undertaken in response to or in anticipation of some change in the economy. Passive (nondiscretionary) policymaking - is policy based on a rule, and is therefore not a response to an actual or potential change in overall economic activity. The NAIRU - is a n on a ccelerating i nflation r ate of u nemployment which is the rate of unemployment below which the rate of inflation tends to rise and above which the rate of inflation tends to fall. The Natural Rate of Unemployment - The rate of unemployment that is estimated to prevail in long-run macroeconomic equilibrium when all workers and employers have fully adjusted to any changes in the economy. The rate consists of two parts: (1) frictional unemployment , which exists due to individuals taking time to search for the best job opportunities and (2) structural unemployment due to rigidities in the economic system.
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