Suppose the natural rate of unemployment is 5 percent. If the actual unemployment rate is 7 percent, then the cyclical unemployment rate

Question

Quizplus · Accepted Answer

The natural rate of unemployment is the sum of frictional and structural unemployment. In this case, it is assumed to be 5 percent. The actual unemployment rate is the sum of natural and cyclical unemployment. Therefore, the cyclical unemployment rate can be calculated as the difference between the actual and natural unemployment rates: 7 percent - 5 percent = 2 percent. Therefore, the answer is A) is 2 percent.

Suppose the Natural Rate of Unemployment Is 5 Percent