The natural rate of unemployment is
A)always zero
B)the unemployment rate that exists when inflation is zero
C)the unemployment rate that exists when output is assumed to be at its full-employment level
D)the unemployment rate that exists above frictional unemployment
E)none of the above

Question

Quizplus · Accepted Answer

The natural rate of unemployment is the unemployment rate that exists when output is assumed to be at its full-employment level, meaning the economy is producing at its maximum potential and there is no cyclical unemployment. It includes structural and frictional unemployment but excludes unemployment caused by business cycles. It is not always zero and is not related to the inflation rate.

The Natural Rate of Unemployment Is