<p>The <strong>Nonaccelerating Inflation Rate of Unemployment (NAIRU)</strong> is a concept in macroeconomics that refers to the level of unemployment at which inflation remains stable, neither accelerating nor decelerating.</p>

<h2>How It Works</h2>
<p>The NAIRU is determined by various factors, including:</p>
<ul>
  <li>Labor market institutions and policies</li>
  <li>Worker and firm behavior</li>
  <li>Demand and supply conditions</li>
</ul>
<p>Economists estimate NAIRU using statistical models and historical data. It's often represented as a percentage of the labor force.</p>

<h2>Why It Matters</h2>
<p>The NAIRU is a crucial concept for policymakers. If unemployment falls below the NAIRU, inflation may accelerate due to increased demand for labor and goods. Conversely, if unemployment rises above the NAIRU, inflation may decelerate or even decrease.</p>
<p>For instance, in the 1970s, many economies experienced <strong>stagflation</strong>—a period of high inflation and high unemployment—because unemployment was above the NAIRU, leading to decreased aggregate demand and lower inflation.</p>