If the structural unemployment rate is 2 percent,the frictional unemployment rate is 3 percent,and the current unemployment rate is 8 percent,then the economy is in a recessionary gap.

Question

Quizplus · Accepted Answer

The natural rate of unemployment is the sum of structural and frictional unemployment rates, which in this case is 5 percent (2 percent structural + 3 percent frictional). Since the current unemployment rate is 8 percent, which is higher than the natural rate, it indicates that the economy is experiencing a recessionary gap.

If the Structural Unemployment Rate Is 2 Percent,the Frictional Unemployment