The natural rate of unemployment is
A) the socially desired rate of unemployment.
B) the unemployment rate that is observed in the long-run regardless of the monetary policy pursued by the central bank.
C) the unemployment rate that is observed in the long-run regardless of all economic policies pursued by the government or central bank.
D) always below 5 per cent.

Question

Quizplus · Accepted Answer

The natural rate of unemployment is the unemployment rate that is observed in the long-run regardless of the monetary policy pursued by the central bank. It is the rate at which there is no cyclical unemployment, meaning all unemployment is due to structural or frictional factors. It is also referred to as the "full employment" rate. It is not necessarily the socially desired rate of unemployment, as that may differ based on individual preferences and values. It is also not necessarily the rate that is observed regardless of all economic policies, as some policies may impact the natural rate of unemployment. Finally, the natural rate of unemployment is not always below 5%, as that is a specific numerical value that may or may not correspond to the actual natural rate in any given economy.

The Natural Rate of Unemployment Is