The natural unemployment rate .
A) is greater than the actual rate of unemployment
B) is the unemployment rate when there is no cyclical unemployment
C) is the same from year to year
D) equals zero

Question

Quizplus · Accepted Answer

The natural unemployment rate, also known as the "non-accelerating inflation rate of unemployment" (NAIRU), represents the rate of unemployment at which there is no cyclical unemployment and only frictional and structural unemployment exist. Therefore, B is the correct answer. Option A is incorrect because the natural unemployment rate is not necessarily greater or less than the actual rate of unemployment. Option C is incorrect because the natural unemployment rate can change over time due to changes in demographics and structural changes in the economy. Option D is incorrect because there is always some level of frictional and structural unemployment in the economy, even if it is small.

The Natural Unemployment Rate