If the actual unemployment rate is 7% and the cyclical unemployment rate is 2%, then the natural rate of unemployment is:
A) 2%.
B) 5%.
C) 7%.
D) 9%.

Question

Quizplus · Accepted Answer

The natural rate of unemployment is the sum of frictional and structural unemployment. Cyclical unemployment is caused by fluctuations in the economy and is not considered part of the natural rate. Therefore, to calculate the natural rate of unemployment, we need to subtract the cyclical unemployment rate from the actual unemployment rate.

Natural rate of unemployment = Actual unemployment rate - Cyclical unemployment rate 
= 7% - 2% 
= 5%

Hence, the answer is B) 5%.

If the Actual Unemployment Rate Is 7% and the Cyclical