Which statement best defines the natural rate of unemployment?
A) It is the unemployment rate that would prevail with zero immigration.
B) It is the rate associated with the highest possible level of GDP.
C) It is the difference between long-run and short-run unemployment rates.
D) It is the amount of unemployment that the economy normally experiences.

Question

Quizplus · Accepted Answer

The natural rate of unemployment refers to the amount of unemployment that the economy normally experiences. This includes frictional unemployment (due to people transitioning between jobs) and structural unemployment (due to changes in the economy such as technology or globalization). It does not include cyclical unemployment, which is caused by fluctuations in the business cycle. It is an important concept for policymakers to understand as it can help inform them on how to approach policies regarding job creation and unemployment.

Which Statement Best Defines the Natural Rate of Unemployment