4. Translation from page.

Translate from page the passages expanding on the subject of the text.

The natural rate of unemployment

Is zero unemployment a worthy goal? Yes, of course, seems an easy answer. But keeping the unemployment rate at zero would require peo­ple dissatisfied with their jobs to stick with them until they found new ones, or they would be un­employed. Moreover, firms would be pressured to immediately hire anyone who applied for work. And if you were not in the labor force and then decided to look for work, you would be forced to take the first job offered—otherwise you would be unemployed. Zero unemploy­ment is not as attractive a goal as it sounds.

Natural rate analysis concludes that nearly all unemployment is voluntary, the sole excep­tions being unskilled people who are unem­ployed because minimum-wage laws prevent employers from hiring these workers at the low wages commensurate with their productivity. Natural rate theorists view all other unemploy­ment as the result of friction: it takes people time to find what they regard as suitable employ­ment, and while they are looking for work, they are unemployed by choice. Individuals can pre­sumably get jobs almost instantly if they are will­ing to take the wage they are worth to the first employer willing to hire them. Frictional un­employment can be viewed as a cost of invest­ment in labor market information and mobility.

According to natural rate theory, expan­sionary macroeconomic policy reduces fric­tional unemployment only because workers are fooled by unanticipated inflation into thinking that the higher wages offered by firms represent real increases in the purchasing power of their earnings. Anyone who is unemployed can get a seemingly suitable, high-paying job quickly dur­ing expansionary periods, when the pool of frictionally unemployed workers is small. In the natural rate view, these artificial declines in fric­tional unemployment reflect cyclical over-em­ployment that is a consequence of inadequate investment in labor market information. But why do employers offer higher wages when ex­pansionary policies are followed? Expansionary policies cause business firms to forecast boom­ing sales that will enable them to raise the prices of their products. After workers recognize that their wages do not buy as much as expected be­cause prices are also rising, many will become dissatisfied and quit to look for more lucrative work.

The eventual result is that frictional unem­ployment will rise back to its natural rate when workers cease being fooled. The natural rate of unemployment is the rate that exists before ex­pansionary policy is initiated; it is achieved when all transactors have accurate expectations about inflation. If expansionary policies are contin­ued, workers will learn to expect inflation and will demand wages that rise continuously to compensate for inflation. This means that Aggregate Supply will shrink continuously. 2377 digits