If the fraction of employed workers who lose their jobs each month (the rate of job separations) is 0.01 and the fraction of the unemployed who find a job each month is 0.09 (the rate of job findings), then the natural rate of unemployment is:

A. 1 percent.

B. 9 percent.

C. 10 percent.

D. about 11 percent.

Question

Poncho

Mathematics

15 March, 07:23

If the fraction of employed workers who lose their jobs each month (the rate of job separations) is 0.01 and the fraction of the unemployed who find a job each month is 0.09 (the rate of job findings), then the natural rate of unemployment is:

A. 1 percent.

B. 9 percent.

C. 10 percent.

D. about 11 percent.

+5

Answers (1)

Know the Answer?

Areli Roach · Answer 1

C. 10%

Step-by-step explanation:

Assuming employment is in some sort of equilibrium and E and U are the numbers of Employed and Unemployed, respectively, we have ...

0.01E = 0.09U

E = (0.09/0.01) U = 9U

Then the unemployment rate as a fraction of the total workforce is ...

U / (U+E) = U / (U + 9U) = 1/10

The natural unemployment rate is 10%.