If the labor market becomes less efficient so that the unemployed are more slowly matched with jobs, then
A) the natural rate of unemployment will increase.
B) the natural rate of unemployment will decrease.
C) the natural rate of unemployment will not change.
D) the natural rate of unemployment could either increase or decrease.

Question

Quizplus · Accepted Answer

The natural rate of unemployment is the rate of unemployment that exists when the labor market is in equilibrium, meaning that there is no cyclical unemployment caused by a recession. Any decrease in efficiency in the labor market would lead to a slower matching of workers with job openings, resulting in an increase in frictional and structural unemployment, which are components of the natural rate of unemployment. Therefore, the natural rate of unemployment would increase.

If the Labor Market Becomes Less Efficient So That the Unemployed