If the cyclical rate of employment equals 1 percent and the actual rate of unemployment equals 8 percent, then the natural rate of unemployment must equal:
A)−7 percent.
B)9 percent.
C)12.5 percent.
D)7 percent.

Question

Quizplus · Accepted Answer

Cyclical unemployment is the difference between the actual rate of unemployment (u )and the natural rate of unemployment (u*); in this case 1 percent = 8 percent − u*, so u* = 7 percent.

If the Cyclical Rate of Employment Equals 1 Percent and the Actual