Which of the following would reduce the natural rate of unemployment?
A)both an increase in the rate of money growth and increased unemployment compensation
B)an increase in the rate of money growth but not increased unemployment compensation
C)an increase in unemployment compensation but not an increase in the rate of money growth.
D)neither an increase in unemployment compensation nor an increase in the rate of money growth.

Question

Quizplus · Accepted Answer

The natural rate of unemployment is determined by structural and frictional factors, not by monetary policy or unemployment compensation. Increasing unemployment compensation could increase the natural rate by reducing the incentive to find work, while changes in money growth affect cyclical unemployment, not the natural rate.

Which of the Following Would Reduce the Natural Rate of Unemployment