ECONOMICS
BUSINESS CYCLES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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natural rate of unemployment.
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frictionally-adjusted unemployment rate.
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cyclically-adjusted unemployment rate.
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potential rate of unemployment.
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Detailed explanation-1: -The natural rate of unemployment is related to two other important concepts: full employment and potential real GDP. The economy is considered to be at full employment when the actual unemployment rate is equal to the natural rate. When the economy is at full employment, real GDP is equal to potential real GDP.
Detailed explanation-2: -When the natural rate of unemployment is equal to the unemployment rate, it means the cyclical rate of unemployment is zero. Hence, when this relationship occurs, the economy is considered to be at full employment.
Detailed explanation-3: -BLS defines full employment as an economy in which the unemployment rate equals the nonaccelerating inflation rate of unemployment (NAIRU), no cyclical unemployment exists, and GDP is at its potential.
Detailed explanation-4: -The natural rate of unemployment is de-fined simply as the rate of unemployment that is compatible with a steady inflation rate. The natural rate can therefore be thought of as the rate of unemployment that would occur in the absence of cyclical fluctuations.