The figure below reflects the inverse relationship between the inflation rate and the unemployment rate.The figure shows that the natural rate of unemployment is:
Figure 16.3

A)2 percent.
B)1 percent.
C)4 percent.
D)8 percent.
E)10 percent.

Question

The figure below reflects the inverse relationship between the inflation rate and the unemployment rate.The figure shows that the natural rate of unemployment is:​ ​
Figure 16.3
​

A)2 percent. 
B)1 percent. 
C)4 percent. 
D)8 percent. 
E)10 percent.

Quizplus · Accepted Answer

The natural rate of unemployment is the rate of unemployment when the economy is at full employment and there is no cyclical unemployment. In the figure, the point where the inflation rate intersects with the long-run Phillips curve represents the natural rate of unemployment. Based on the graph, this point is located at 4 percent.

The Figure Below Reflects the Inverse Relationship Between the Inflation