Question

why should tge target rate for unemployment not be 0%

why should tge target rate for unemployment not be 0%

Homework Answers

Answer #1

The unemployment rate of 0% is not only feasible or possible but is also not desirable.

This is because an economy can never have 0% unemployment rate as there will always be some type of frictional unemployment in the economy. For eg people switching jobs or taking breaks to learn new technology or study further will make them count unemployed today but not tomorrow and thus an unemployment rate of 0% is not possible.

Also, such a low unemployment rate means all workers are employed and paid and thus demanding more goods and services. This will lead to increased inflation beyond limits. This makes a zero percent unemployment rate undesirable too.

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