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Given the following data, what is the natural rate of unemployment? Structural UE = 3% Seasonal...

Given the following data, what is the natural rate of unemployment? Structural UE = 3% Seasonal UE = 1/2% Frictional UE = 2% Cyclical UE = -3%

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Answer #1

Ans.1. =

Natural rate of unemployment = (Fractionally Unemployed + Structurally Unemployed) ÷ Labour Force


= (2% + 3%) ÷ 8.5%
= 5% ÷ 8.5%
= 0.5882%

Labour Force = Economically Active Population (Employed or Unemployed)

= Fractionally UE + Structurally UE + Seasonal UE + Cyclical UE
= 2% + 3% + 1/2% + 3%
= 8.5%


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