-Refer to Exhibit 16.6, which reflects the relationship between the inflation rate and the unemployment rate. The figure shows that the natural rate of unemployment is _____

Question

Quizplus · Accepted Answer

The natural rate of unemployment is the level of unemployment when the economy is at full employment, typically represented where the inflation rate does not change with changes in unemployment. Without seeing Exhibit 16.6, the correct answer cannot be determined from the information provided. However, historically and theoretically, a natural rate of unemployment of 4 percent is a common estimate, reflecting frictional and structural unemployment in a healthy economy.