Question

List and explain the types of unemployment. What is the natural rate of unemployment?

Answer 1

There are three types of unemployment which are cyclical unemployment, frictional unemployment, and structural unemployment.

Cyclical unemployment: the deviation of unemployment from its natural rate.

Frictional unemployment: unemployment that occurs because it takes time for laborers to find jobs that meets their skills and knowledge.

Structural unemployment: unemployment that occurs because the number of jobs available in the labor market is not able to absorb or provide jobs to everyone who wants to works.

The economy's natural rate of unemployment refers to the amount of unemployment that the economy normally experiences.In other words, the normal rate of unemployment around which the unemployment rate fluctuates is called natural rate of unemployment.