If the cyclical rate of employment equals 2% and the actual rate of unemployment equals 8%,then the natural rate of unemployment must equal

Question

Quizplus · Accepted Answer

The natural rate of unemployment is the rate of unemployment that exists when the economy is at potential output. It includes structural and frictional unemployment, which are not affected by the business cycle. The cyclical rate of employment represents the deviation from the natural rate of unemployment. In this case, the cyclical rate is 2% and the actual rate of unemployment is 8%. Therefore, the natural rate of unemployment can be calculated as:

Natural rate of unemployment = Actual rate of unemployment – Cyclical rate of employment
= 8% - 2%
= 6%

Therefore, the best choice is D) 6%.

If the Cyclical Rate of Employment Equals 2% and the Actual