Homework Answers
At the natural rate of unemployment, there is no inflation. It is the sum of frictional and structural unemployment.
In the long run, at the natural level, there are no business cycles. No business cycles mean that there is neither recession nor boom. This is the reason that the natural rate excludes the Cyclical Unemployment component from its calculation.
Hence, the natural rate of unemployment occurs when there is neither recession nor boom.
So, Option A. is correct
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Cyclical unemployment can best be described as the increase in unemployment when the economy is in a boom. o increase in unemployment when the economy is in a recession. amount of unemployment when real and potential GDP are equal. O increase in unemployment above the natural rate during and in the aftermath of recessions. O amount of unemployment when real and nominal GDP are equal.
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