The natural rate of unemployment:
A)is composed of frictional, structural, and cyclical unemployment.
B)is equal to zero.
C)is always greater than the actual unemployment rate.
D)is composed of structural and frictional unemployment.

Question

Quizplus · Accepted Answer

The natural rate of unemployment is composed of structural and frictional unemployment. The other options are incorrect: A is incorrect because cyclical unemployment is not part of the natural rate of unemployment, but rather a deviation from it caused by changes in the business cycle; B is incorrect because it is practically impossible for the unemployment rate to be equal to zero; and C is incorrect because the actual unemployment rate can be equal to or even less than the natural rate of unemployment in times of boom or economic growth.

The Natural Rate of Unemployment