The natural unemployment rate is the sum of the structural and frictional unemployment rates.

Question

Quizplus · Accepted Answer

The natural unemployment rate (or non-accelerating inflation rate of unemployment, NAIRU) is typically defined as the unemployment rate that prevails when there is no cyclical unemployment, i.e. when the economy is operating at its potential output level. It consists of two components: structural unemployment, which reflects a mismatch between the skills and qualifications of workers and the requirements of available jobs, and frictional unemployment, which is the temporary unemployment that arises when workers are between jobs or are transitioning to a new one. Therefore, the natural unemployment rate is indeed the sum of these two rates.

The Natural Unemployment Rate Is the Sum of the Structural