The term natural rate of unemployment refers to: The unemployment that arises due to purely seasonal factors, such as unemployed lifeguards in the winter The minimum possible unemployment rate for an economy The unemployment rate that would occur if there were no frictional unemployment The unemployment rate that occurs when an economy's real GDP is equal to its potential output

Question

Matthew Soto

Business

18 August, 22:40

The term natural rate of unemployment refers to: The unemployment that arises due to purely seasonal factors, such as unemployed lifeguards in the winter The minimum possible unemployment rate for an economy The unemployment rate that would occur if there were no frictional unemployment The unemployment rate that occurs when an economy's real GDP is equal to its potential output

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Answers (1)

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Marcelo Robles · Answer 1

The unemployment rate that occurs when an economy's real GDP is equal to its potential output

Explanation:

The natural rate of unemployment will exist even when the economy is at full employment. It consists of frictional and structural unemployment but not cyclical unemployment. The natural rate of unemployment is present in a healthy and growing economy. In other words, natural unemployment is the unemployment rate when the labor market is at equilibrium.

When the economy is growing at an optimum rate, the real GDP is equal to potential GDP. In such a situation, the economy will experience full employment. At full employment, the rate of unemployment matches the natural rate of unemployment. As such, the natural rate of unemployment will exist when the real GDP is equal to potential GDP.