ECONOMICS
GDP
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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It can vary over time (be changed)
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It is 2% or less of the civilian labor force
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It is equal to the structural unemployment rate
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It allows for some frictional and cyclical unemployment
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It is the full-employment rate minus the cyclical unemployment rate
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Detailed explanation-1: -The correct answer is c. It is higher if structural or frictional unemployment is higher. The natural unemployment rate can be calculated by adding frictional and structural unemployment in the country. It can be higher if any of the two components increase over a certain period.
Detailed explanation-2: -The actual employment might be above or below the natural unemployment. When an economy has actual unemployment equal to natural unemployment is said to be at full employment. The economy is above full employment if the actual rate of unemployment is below the natural rate. Therefore, the correct answer is option d.
Detailed explanation-3: -Because structural and institutional factors change over time, the natural rate of unemployment will also vary. However, the need to understand the determinants of the natural rate and its re-lation to the actual rate of unemployment is quite real as the cost of error may be acceler-ating inflation or deflation.
Detailed explanation-4: -The natural rate of unemployment is not constant. As discussed earlier, the natural rate of unemployment is the rate that is consistent with sustainable economic growth, or when actual output is equal to potential output. It is therefore expected that changes within the economy can change the natural unemployment rate.