The natural rate of unemployment is generally thought of as the
A) ratio of the frictional unemployment rate to the cyclical unemployment rate.
B) sum of structural unemployment and cyclical unemployment.
C) sum of frictional unemployment and cyclical unemployment.
D) sum of frictional unemployment and structural unemployment.

Question

Quizplus · Accepted Answer

The natural rate of unemployment refers to the unemployment rate that exists due to structural factors in the economy, such as changes in technology or shifts in consumer preferences. It is also composed of the frictional unemployment rate, which is the rate of unemployment that results from people searching for jobs, and the structural unemployment rate, which is the rate of unemployment that results from a mismatch between the skills of workers and the requirements of available jobs. The cyclical unemployment rate, on the other hand, is the rate of unemployment that results from economic downturns and fluctuations in the business cycle. Therefore, the natural rate of unemployment is best represented by the sum of the frictional unemployment rate and the structural unemployment rate, which is choice D.

The Natural Rate of Unemployment Is Generally Thought of as the