If the natural rate of unemployment is 4 percent, what is the actual rate of unemployment if output is 2 percent above potential?

Question

Quizplus · Accepted Answer

The actual rate of unemployment can be found by subtracting the potential output from the actual output and then looking at the difference between this value and the natural rate of unemployment.

Actual unemployment rate = natural unemployment rate + (actual output - potential output)

Substituting the values given in the question:

Actual unemployment rate = 4% + (2% - 0%)

Actual unemployment rate = 6%

Therefore, the actual rate of unemployment is 6 percent.

The best choice is C) 3 percent because it is the only option that correctly represents the actual rate of unemployment given the conditions in the question.

If the Natural Rate of Unemployment Is 4 Percent, What