The natural rate of unemployment in the U.S. is equal to frictional unemployment
ID: 1210438 • Letter: T
Question
The natural rate of unemployment in the U.S. is equal to frictional unemployment plus cyclical unemployment. is the rate of unemployment that exists in the long run after everyone in the economy has fully adjusted to changes that have occurred. is equal to cyclical unemployment plus structural unemployment. has increased steadily and without interruption since the conclusion of World War II. The actual rate of unemployment is less than the natural rate of unemployment when cyclical unemployment is positive, greater than the natural rate of unemployment when cyclical unemployment is positive, greater than the natural rate of unemployment when cyclical unemployment is zero, always equal to the natural rate of unemployment.Explanation / Answer
Ans 1. The Natural Rate of Unemployment is the rate of Unemployment when the labour market is in equilibrium and corresponds to the long run aggregate supply of a country. The Natural Rate of Unemployment will therefore include:
· Frictional unemployment
· Structural unemployment
It is the rate of unemployment when cyclical unemployment rate is zero.
Therefore option B is correct.
Ans 2.
The natural rate of unemployment is the rate of unemployment that corresponds to potential GDP or long-run aggregate supply of an economy. It is the unemployment rate that exists when the economy is neither in a boom nor in a recession and is functioning normally. For this reason, the natural rate of unemployment corresponds to a cyclical unemployment rate of zero.
Actual unemployment will therefore be greater than natural rate of unemployment if cyclical unemployment is positive. Therefore option B is correct.