Question

The natural rate of unemployment a. is an artificially low rate that cannot be maintained. b. is a constant rate that is unaffected by changes in public policy. c. is the rate of unemployment present when the economy is operating at full employment. d. is equal to the number of persons unemployed divided by the number in the labor force.

Answer 1

C) is the rate of unemployment present when the economy is operating at full employment.

Step-by-step explanation:

The natural rate of unemployment includes only frictional unemployment and structural unemployment, and is generally referred to as full employment. It is achieved when the economy is growing and cyclical unemployment is absent. The natural rate of unemployment is never equal to 0. Currently the Fed estimates the natural rate of unemployment between 3.5%-4.5%. Below 3.5%, there would be a shortage of labor and the price of labor would increase, until the quantity demanded is reduced.

Frictional unemployment is voluntary and happens when a person quits his/her job in order to seek a better job.

Structural unemployment is not voluntary and happens when the workers lack the necessary skills to fill vacant job openings.