Question

At the trough of the business cycle, cyclical unemployment is _____ and the actual unemployment rate _____ the natural rate of unemployment. a. equal to zero; equals b. positive; is less than c. positive; equals d. positive; exceeds e. negative; exceeds

Answer 1

Answer:

d. positive; exceeds

Explanation:

Unemployment rate refers to the percentage of the total labor force in an economy, who are unemployed but seeking to be gainfully employed. The unemployment rate is divided into various types, these include;

I. Cyclical unemployment rate (CU).

II. Frictional unemployment rate (FU).

III. Structural unemployment rate (SU).

IV. Actual unemployment rate (AU).

V. Natural Rate of Unemployment (NU).

Cyclical unemployment can be defined as a type of unemployment which is typically related to changes in the business, economy or industry cycle such as recession, governmental policies etc.

Mathematically, cyclical unemployment is given by the formula;

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

>>> $CU = AU – NU$

The trough of a business cycle refers to the stage where decline (fall) in business activities ends and transit into expansion i.e the business moves from a decline (fall) to an expansion (rise).

Hence, at the trough of the business cycle, cyclical unemployment is positive and the actual unemployment rate exceeds the natural rate of unemployment because there's an increase in the level of output or productivity.