Earlier I studied macroeconomics from Blanchard. But now while reading Mankiw's Macroeconomics I found different definition for natural rate of unemployment. According to Blanchard,**"the rate of unemployment (and by implication the level of output) that prevails if the price level and the expected price level are equal."** (pg. 135, sixth edition) and**"The natural rate of unemployment is the rate of unemployment required to keep the inflation rate constant."** (pg. 170, sixth edition)But according to Mankiw,**"The natural rate is the rate of unemployment toward which the economy gravitates in the long run, given all the labor-market imperfections that impede workers from instantly finding jobs."**(pg. 177. eighth edition),**i.e., where unemployment rate reaches steady-state, it neither increases or decreases, where rate of job finding is equal to rate of job separation.**What is the common ground between all these definitions? Are they different or essentially the same? If so, then how?
They are all essentially equivalent. The number of job seekers is equal to the number of jobs firms are looking to hire. They just haven't hooked up yet.If most of the stores you go shopping at have help wanted signs posted we are probably beyond full employment. If you see signs posted that say "not hiring" we are probably in a recession. In the former case there will be an upward pressure on wages and prices such that inflation will come in Higher than expected. In the latter there will be a downward pressure on wages and/or wage growth putting downward pressure on inflation.
