ECONOMICS
BUSINESS CYCLES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Is zero percent unemployment
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Is when cyclical unemployment is less than frictional unemployment
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Is the sum of frictional and structural unemployment
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Results in higher cyclical unemployment
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Can never decrease since it represents the optimal amount if unemployment
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Detailed explanation-1: -Natural Rate of Unemployment: unemployment rate consistent with full employment = frictional rate + structural rate = u*. Currently the natural rate is estimated to be somewhere between 5.5% and 6.5%. However, it is not estimated very precisely.
Detailed explanation-2: -The natural rate of unemployment (NRU) is the unemployment rate that exists when the economy produces full-employment real output. NRU is equal to the sum of frictional and structural unemployment.
Detailed explanation-3: -In terms of these three components, the natural rate of unemployment is simply the rate that would occur in the absence of cyclical fluctuations. It is the sum of frictional and structural unemployment.
Detailed explanation-4: -The Natural Rate of Unemployment (NRU) is the sum of: frictional and structural unemployment.
Detailed explanation-5: -Natural unemployment consists of two of the three main types of unemployment: frictional and structural. It explains why there will always be some level of unemployment, even in a healthy economy. People will always be changing jobs, and sometimes they leave a job before finding a new one.