Suppose that the natural unemployment rate is 4.5 percent and the actual unemployment rate is 3.5 percent.Then cyclical unemployment is

Question

Quizplus · Accepted Answer

The natural unemployment rate includes structural and frictional unemployment. Actual unemployment rate = natural unemployment rate + cyclical unemployment. Therefore, cyclical unemployment = actual unemployment rate - natural unemployment rate = 3.5% - 4.5% = -1%. However, since negative cyclical unemployment is not possible, we take the absolute value and get 1%.

Suppose That the Natural Unemployment Rate Is 4