Back to the natural rate of Unemployment o by definition, the natural rate of unemployment is that unemployment rate such that the actual price level turns out equal to the expected price level./ More conveniently here, the natural rate of unemployment is the unemployment rate such that the actual inflation rate is equal to the expected inflation rate Denote the natural unemployment rate by un. Then imposing the condition that actual inflation and expected inflation be the same(t =t t )in equation (10. 1)gives To continue 2003-7-20 102003-7-20 10 Back to the Natural Rate of Unemployment By definition, the natural rate of unemployment is that unemployment rate such that the actual price level turns out equal to the expected price level. More conveniently here, the natural rate of unemployment is the unemployment rate such that the actual inflation rate is equal to the expected inflation rate. Denote the natural unemployment rate by un . Then, imposing the condition that actual inflation and expected inflation be the same (πt =πt e ) in equation (10.1) gives To continue