If the frictional rate of unemployment is 1%, the structural rate of unemployment is 2.1%, and the total unemployment rate is 7%, then we can conclude that:
A)the cyclical rate of unemployment is 3.1%.
B)the equilibrium rate of unemployment is 3.1%.
C)the economic growth rate is -7%.
D)7% of workers in the labor force are underemployed.

Question

Quizplus · Accepted Answer

The total unemployment rate is equal to the sum of the frictional, structural, and cyclical rates of unemployment. Therefore, the cyclical rate of unemployment can be calculated as follows: cyclical rate = total rate - frictional rate - structural rate = 7% - 1% - 2.1% = 3.9%. The equilibrium rate of unemployment is equal to the sum of the frictional and structural rates of unemployment (i.e. the natural rate of unemployment). Therefore, the equilibrium rate of unemployment can be calculated as follows: equilibrium rate = frictional rate + structural rate = 1% + 2.1% = 3.1%.

If the Frictional Rate of Unemployment Is 1%, the Structural