In a country with a working- age population of 30 million, 18 million are employed, 2 million are unemployed, and 2 million of the employed are working part- time, half of whom wish to work full- time.If 1 million of the unemployed are cyclically unemployed, what is the natural unemployment rate?
A)6.7 percent
B)5 percent
C)5.6 percent
D)1 percent
E)11.1 percent

Question

Quizplus · Accepted Answer

The natural unemployment rate includes both frictional and structural unemployment but not cyclical unemployment. With a total working-age population of 30 million, 18 million are employed, and 2 million are unemployed. Since 1 million of the unemployed are cyclically unemployed, they are not included in the natural unemployment rate calculation. Therefore, the calculation is based on the remaining 1 million unemployed who are not cyclically unemployed. The labor force is the sum of employed and unemployed individuals looking for work, which is 18 million + 2 million = 20 million. The natural unemployment rate is the non-cyclically unemployed (1 million) divided by the labor force (20 million), which equals 5 percent.

In a Country with a Working- Age Population of 30