The natural rate of unemployment is:
A) the average rate of unemployment around which the economy fluctuates.
B) about 10 percent of the labor force.
C) a rate that never changes.
D) the transition of individuals between employment and unemployment.

Question

Quizplus · Accepted Answer

The natural rate of unemployment is the average rate of unemployment around which the economy fluctuates. It is also referred to as the non-accelerating inflation rate of unemployment (NAIRU) and is determined by structural factors such as demographics, technology, and labor market institutions. It is not a fixed or unchanging rate and can be affected by changes in these structural factors. It is typically estimated to be between 4 and 6 percent in the United States. Choice B is incorrect as the natural rate of unemployment is typically lower than 10 percent. Choice C is incorrect as the natural rate of unemployment is not a fixed or unchanging rate. Choice D is incorrect as it refers to the process of individuals moving between employment and unemployment, not the rate of unemployment itself.

The Natural Rate of Unemployment Is