Question

In the long run, the unemployment rate is determined by ________.

      
the rate of cyclical unemployment

       
the rates of frictional and structural unemployment

       
the rate of structural unemployment

       
the rate of frictional unemployment

Answer 1

Option B) The rates of frictional and structural unemployment.

In the long run. unemployment rate is determined by the Natural Rate of Unemployment. Natural Rate of Unemployment can be broken down into two components, namely, frictional unemployment and structural unemployment. Structural unemployment exists when a worker is not able to get a job because of the right skills. For example, lets say that previously an economy used to produce handmade clothes but with technology evolving the economy shifts to producing machine made clothes as machine made clothes are cheaper to produce and time saving. In this situation. people working in the handmade clothes industry would face structural unemployment because they don't have the skills needed in the machine made industry. Frictional unemployment, on the other hand, exists when people are looking for jobs or they are changing from one job to another. Frictional unemployment can exists when people are returning to the labor force, for example, a person can leave their job because of personal reasons like moving to their parent's home if their close ones are extremely sick and there is no one to look after. Frictional rate of unemployment rates are usually short term and it is the lowest rate of unemployment.