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The inflationary potential of a particular inflation rate depends on the economy’s NAIRU or NARU, which, in turn, depends in part on:
Please Explain the answer also.
If the demand for the labour is very high and available skilled labour for that job are not available/ unable to keep up with the pace of labour demand it results in shortages of trained workers resulting in bottleneck This will continue till the skilled labour force improves
If the skill set of a large part of the labor force cannot satisfy the hiring need from the employers, the NAIRU of such an economy can be quite high.
When unemployment rate reaches higher NAIRU and NARU levels it means there is a real shortage of labour and it drives up wages resulting in cost push inflation.
so option c would be the answer