Question

When unexpected inflation is zero, the corresponding unemployment rate is:

group of answer choices
A. the structural unemployment rate.
B. the cyclical unemployment rate.
C. zero.
D. the equilibrium unemployment rate.
E. the frictional unemployment rate

Answer 1

The corresponding unemployment rate when unexpected inflation is zero is the natural rate of unemployment, which includes both frictional and structural unemployment but not cyclical unemployment.

Step-by-step explanation:

When unexpected inflation is zero, the corresponding unemployment rate is the natural rate of unemployment. This rate includes both frictional and structural unemployment but excludes cyclical unemployment, which is associated with fluctuations in the business cycle. However, the unemployment rate never falls to zero due to labor market dynamics and the time it takes for job seekers and employers to find each other.

This causes frictional unemployment (E) to exist even in a strong economy. Structural unemployment (A) is caused by shifts in demand away from certain job skills.When the economy is producing at potential GDP, cyclical unemployment is zero, but frictional and structural unemployment will still exist due to the dynamics of the job market, like workers changing jobs or industries undergoing changes in demand for skills.