Question

The natural rate of unemployment is not zero because __________. a. some workers will always have few skills. b. unemployment will always rise during the recessionary phase of the business cycle. c. the economy is characterized by dynamic change and imperfect information. d. not every member of society is capable of participating in the labor force.

Answer 1

Answer: C. The economy is characterized by dynamic change and imperfection.

Explanation: The natural rate of unemployment can be explained as the limit on the lowest or minimum level of unemployment a nation can achieve from standard resources or output. It has often been argued that even in healthy economies the natural rate of unemployment cannot be zero due to factors such as flexibility, technological replacement and some who lack the required skill to be employed, imperfect information. Flexibility or dynamic nature of the market affords individuals the opportunity to change or swap jobs, fresh graduate who may need a bit of time to find jobs, recession characterize the dynamic nature of the economy, imperfection in information in capital and labor market is also a contributing factor.