Question

Suppose that in an economy the structural unemployment rate is 2.2 percent, the natural unemployment rate is LO6 MO4 percent, and the cyclical unemployment rate is 2 percent. The frictional unemployment rate is _________ percent and the actual unemployment rate (in this economy) is ___________ percent.

Answer 1

Answer: 3.1%; 7.3%

Explanation:

Suppose that in an economy the structural unemployment rate is 2.2 percent, the natural unemployment rate is 5.3 percent, and the cyclical unemployment rate is 2 percent. The frictional unemployment rate is 3.1 percent and the actual unemployment rate (in this economy) is 7.3 percent.

1. Natural Unemployment rate = Structural Unemployment + Frictional Unemployment

5.3% = 2.2% + Frictional Unemployment

Frictional Unemployment = 5.3% - 2.2%

= 3.1%

2. Actual Unemployment = Cyclical Unemployment + Natural Unemployment

= 2% + 5.3%

= 7.3%