Question

The natural rate of unemployment is the a. unemployment rate that would prevail with zero inflation. b. amount of unemployment that the economy normally experiences. c. difference between the long-run and short-run unemployment rates. d. rate associated with the highest possible level of GDP.

Answer 1

Answer:

B) amount of unemployment that the economy normally experiences.

Explanation:

The natural rate of unemployment = frictional unemployment (voluntary, when people seek a better job) + structural (personal abilities do not fit the required skills to perform tasks).

Natural rate of unemployment is generally referred to as full employment and happens when the economy is healthy and growing. Full employment does not = 0 unemployment, it means 0 cyclical unemployment.

The natural unemployment will reach its lowest level, when the economy is operating at it potential GDP level.

Answer 2

Answer:

b. amount of unemployment that the economy normally experiences