The natural rate of unemployment will NOT rise due to:
A) more generous terms for unemployment compensation.
B) an increase in union membership.
C) an increase in labour productivity that translates into greater demand for labour.
D) a surge in the number of young and inexperienced workers.

Question

Quizplus · Accepted Answer

An increase in labour productivity that translates into greater demand for labour would lead to lower unemployment and not contribute to the natural rate of unemployment rising.

Answer: D
 A surge in the number of young and inexperienced workers may initially increase the unemployment rate, but it would not affect the natural rate of unemployment in the long run as this rate is determined by structural and frictional factors.

The Natural Rate of Unemployment Will NOT Rise Due To