Question

iz Instructions over the questions carefully. There are 30 questions and each question has a value of 3 points. Question 26 The unemployment rate that occurs during full employment (known as the natural rate of unemployment) is: The unemployment rate experienced by the least-skilled workers in the economy. The unemployment rate experienced by the most-skilled workers in the economy. The unemployment rate below which inflation will become a problem. The unemployment rate experienced at the depth of a depression. Previous

Answer 1

(i) The natural rate of unemployment usually occurs due to the structure of labor force.(structural unemployment). It arises due to the lack of certain skills. It means skills that person have do not match with the skills needed for available jobs (like change in technology).

Fractional unemployment also have little effect on it because it arises for very short period of time.

Point (iii) and (iv) may arise from exogenous factors like government policies. It may also increase natural rate of unemployment for example during recession but is not considered as natural because it is cyclical in nature.

During depression, Current unemployment rate is less than natural rate.