If the unemployment rate is 9 percent and the natural rate of unemployment is 7.5 percent, then the:
A)frictional unemployment rate is 7.5 percent.
B)cyclical unemployment rate and the frictional unemployment rate together are 7.5 percent.
C)cyclical unemployment rate is 1.5 percent.
D)natural rate of unemployment will eventually increase.

Question

Quizplus · Accepted Answer

The 9% unemployment rate includes both the cyclical and the natural unemployment rate. Therefore, to find the cyclical unemployment rate, we can subtract the natural rate from the actual rate: 9% - 7.5% = 1.5%. This means that 1.5% of the unemployed population is due to the cyclical factors in the economy, such as a recession or a slowdown in growth. The frictional unemployment rate, which is due to individuals in between jobs or looking for better job opportunities, is not given in this scenario. Option A is incorrect as it assumes that the entire economy is at the natural rate of unemployment, which is not the case. Option D is also incorrect as the natural rate of unemployment is assumed to be a constant rate in the long run, and not affected by short-term fluctuations in the economy.

If the Unemployment Rate Is 9 Percent and the Natural