Question

4. Explain the difference between the natural rate of unemployment and the actual rate of unemployment as reported by the US Department of Labor. (in your own words)

Answer 1

Ans;

The natural rate of unemployment is the sum of structural and frictional unemployment.The actual unemployment rate includes structural unemployment,frictional unemployment and cyclical unemployment.Hence the difference between the natural rate of unemployment and the actual rate of unemployment ​is that cyclical unemployment is not included in the natural rate of unemployment.Natural rate of unemployment means level of unemployment in the economy in the absence of cyclical unemployment.