ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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-2: -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-3: -The natural rate of unemployment is the lowest level that a healthy economy can sustain without creating inflation. Natural unemployment contains three components: structural unemployment, surplus unemployment, and frictional unemployment.

Detailed explanation-4: -Frictional unemployment results when people are temporarily unemployed, either because they are new to the job market or are searching for a better job. Structural unemployment is caused by a mismatch in the skills held by those looking for work and the skills demanded by those seeking workers.

Detailed explanation-5: -Unemployment Rate = Unemployed / Civilian Labor Force The civilian labour force, as mentioned in the formula, consists of both employed and unemployed people.