Question

The actual unemployment rate in the economy is 9%. If the natural rate of unemployment is 5%, then we are certain that the: * 10 points A. frictional unemployment rate is 4%. B. cyclical unemployment rate is 4%. C. structural unemployment rate is 4%. D. cyclical unemployment rate is 14%. E. cyclical unemployment rate is 5%.

Answer 1

Answer:

B. cyclical unemployment rate is 4%

Explanation:

Unemployment rate refers to the percentage of the total labor force in an economy, who are unemployed but seeking to be gainfully employed.

Basically, unemployment rate is divided into various types and these include; cyclical unemployment rate (CU), frictional unemployment rate (FU), structural unemployment rate (SU), Actual unemployment rate (AU) and Natural Rate of Unemployment (NU).

In this scenario, the actual unemployment rate in the economy is 9%. If the natural rate of unemployment is 5%, then we are certain that the cyclical unemployment rate is 4%.

$Cyclical \; unemployment \; rate (CU) = Actual \; unemployment \; rate (AU) - Natural \; unemployment \; rate (NU)$

$CU = AU - NU$

Substituting into the equation, we have;

$CU = 9 - 5$

Cyclical unemployment rate = 4%