Question

Paolo recently lost his job as a waiter at a local restaurant. A recent increase in the minimum wage keeps local employers from adding more of the low-skill positions for which he qualifies, so he has been unable to find work. He continues to look for a job, but he's considering going back to school for vocational training.The following table shows data on frictional, cyclical, structural, and total unemployment for an economy.
Unemployment Type Rate (Percent)
Frictional 1.1
Cyclical 0.0
Structural 3.2
Total unemployment 4.3
True or False: This economy is not currently at its natural rate of unemployment.
a) True
b) False

Answer 1

Answer:

B) False

Explanation:

The natural rate of unemployment does not include cyclical unemployment, in this case cyclical unemployment is 0.

The natural rate of unemployment is the unemployment rate that exists when the economy is going through its expansion cycle. The availability of new jobs  has decreased because the minimum wage increased, not because the economy is not doing well.