Question

A Explain briefly why actual unemployment is never zero even when the economy is considered to be in a state of full employment. B why do economists and business investors expect inflation to accelerate when actual unemployment falls below the natural rate of unemployment (NAIRU)? C What is the current actual unemployment rate for the US economy? Do you think the current unemployment rate is less than, equal to or above NAIRU?Explain your answer.

Answer 1

Though at any particular instance the economy can be considered in a state of full employment but there are always new workers entering into the job market. Also many workers are leaving the job market. One can also find a significant share of wokers who are in the transition phase i.e. are switching the jobs and in the transiton period remain jobless. This may be also due to firms laying off labor.