Factors that influence the natural unemployment rate include i.the pace of structural change.
Ii)unemployment benefits.
Iii)the real wage rate.

Question

Quizplus · Accepted Answer

The natural unemployment rate is the rate of unemployment that exists in the economy due to structural factors such as job mismatch, technological change or skill shortages, and frictional factors such as job search and relocation.

Factors that influence the natural unemployment rate are:

i. The pace of structural change: This refers to the speed at which industries and occupations are changing. When there is a rapid structural change, workers may find it difficult to adjust to new jobs, leading to a higher natural unemployment rate.

ii. Unemployment benefits: Unemployment benefits increase the duration of job search and reduce workers' incentives to accept lower-paying jobs, leading to a higher natural unemployment rate.

iii. The real wage rate: The real wage rate is the wage rate adjusted for inflation. If real wages are higher than the equilibrium wage rate, there will be a surplus of labor, leading to a higher natural unemployment rate.

Therefore, all three factors (i, ii, and iii) influence the natural unemployment rate. The correct answer is D.

Factors That Influence the Natural Unemployment Rate Include I