The natural rate of unemployment is not zero because
A) some workers will always have few skills.
B) unemployment will always rise during the recessionary phase of the business cycle.
C) the economy is characterized by dynamic change and imperfect information.
D) not every member of society is capable of participating in the labor force.

Question

Quizplus · Accepted Answer

The natural rate of unemployment is not zero because the economy is characterized by dynamic change and imperfect information. This means that even in a healthy economy with low unemployment, there will always be some level of turnover in the labor market as industries shift and workers transition between jobs. Additionally, imperfect information means that there will always be some frictional unemployment as workers search for new jobs and employers search for the right workers. These factors contribute to a natural rate of unemployment that is not zero. Choices A, B, and D may all contribute to the natural rate of unemployment, but they are not the main reasons why it is not zero.

The Natural Rate of Unemployment Is Not Zero Because