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

Question

Quizplus · Accepted Answer

The actual rate of unemployment is equal to the sum of the natural rate of unemployment and the cyclical unemployment. If output is 2% above potential, it means the economy is operating above its potential level of output, which will lead to a decrease in the cyclical unemployment rate. As a result, the actual rate of unemployment will be lower than the natural rate. Since the difference between actual and potential output is 2%, the cyclical unemployment rate can be estimated to be around 2%. Therefore, the actual unemployment rate is 4% (natural rate) + 2% (cyclical rate) = 6%. However, since the question is asking for the difference between the natural rate and the actual rate, the answer is 6% - 4% = 2%, which is choice B.

If the Natural Rate of Unemployment Is 4%,what Is the Actual