With everything else held constant, if 5% of those considered to be frictionally unemployed found work while the number of people considered to be structurally unemployed increased by 5%, the natural rate of unemployment:
A) increases by 10%.
B) equals the unemployment rate.
C) does not change.
D) decreases by 10%.

Question

Quizplus · Accepted Answer

The natural rate of unemployment is the sum of frictional and structural unemployment. If 5% of frictionally unemployed find work, frictional unemployment decreases. However, if structural unemployment increases by 5%, the changes offset each other, leaving the natural rate unchanged.

With Everything Else Held Constant, If 5% of Those Considered