If the structural unemployment rate is 3 percent,the frictional unemployment rate is 3 percent,and the current unemployment rate is 5 percent,then the economy is in a recessionary gap.

Question

Quizplus · Accepted Answer

The sum of structural and frictional unemployment is known as natural unemployment or the non-accelerating inflation rate of unemployment (NAIRU) and is considered to be the normal or equilibrium level of unemployment in the economy. Therefore, a current unemployment rate of 5 percent is actually lower than the NAIRU, indicating that the economy is operating above its potential output level and is not in a recessionary gap.

If the Structural Unemployment Rate Is 3 Percent,the Frictional Unemployment