The natural rate of unemployment is the
A) rate where unemployment equals 0 percent.
B) same as cyclical unemployment.
C) rate where frictional unemployment equals 0 percent.
D) rate where cyclical unemployment equals 0 percent.
E) rate where frictional plus structural unemployment equals 0 percent.

Question

Quizplus · Accepted Answer

The natural rate of unemployment is the rate where the economy is operating at full employment, meaning there is no cyclical unemployment. The other types of unemployment (frictional and structural) are considered to be natural and unavoidable in any economy, so the natural rate of unemployment is not zero. Therefore, choice A is not correct. Choice B is incorrect because the natural rate of unemployment is not the same as cyclical unemployment. Choice C is also incorrect because the natural rate of unemployment includes frictional unemployment, so it is not when frictional unemployment equals zero. Choice E is incorrect because it includes both types of natural unemployment (frictional and structural), not just structural.

The Natural Rate of Unemployment Is the