Question

The natural rate of unemployment is the unemployment rate when... A. all workers seeking employment have...

The natural rate of unemployment is the unemployment rate when...

A. all workers seeking employment have taken jobs

B. all of the unemployed are only structurally unemployed

C. there is no frictional unemployment

D. there is no cyclical unemployment

E. there are no new unemployed individuals

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Answer #1

Option D.

  • Natural rate of unemployment is a rate of unemployment at which there is a full level of employment.
  • That is, full output is employed and the economy is producing at full potential when an economy is having a natural rate of unemployment.
  • Natural rate of unemployment includes the sum of both the structural and frictional unemployment level's.
  • During the natural rate of unemployment, cyclical unemployment is absent as the economy is producing at full potential.
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