Learning Path
Question & Answer1
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Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The level of unemployment that exists when the economy is at full employment
B
The maximum level of unemployment a government aims to achieve
C
The unemployment rate during a recession
D
The unemployment rate for people with college degrees
Understanding the Answer
Let's break down why this is correct
Answer
The natural rate of unemployment is the level of unemployment that exists when the economy is healthy and growing at a normal pace. This rate includes people who are between jobs, known as frictional unemployment, and those who are in jobs that do not match their skills, called structural unemployment. It does not include people who are unemployed due to economic downturns or recessions. For example, if a recent college graduate is looking for their first job, they contribute to the natural rate of unemployment because they are actively seeking work but haven’t found the right fit yet. Understanding this helps economists gauge the overall health of the economy and make informed decisions about policies.
Detailed Explanation
The natural rate of unemployment is the level when the economy is healthy. Other options are incorrect because Some might think this is the highest unemployment a government wants; This option suggests unemployment during hard times is the natural rate.
Key Concepts
Natural rate of unemployment
Topic
Long Run Economic Adjustment
Difficulty
easy level question
Cognitive Level
understand
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