If the natural rate of unemployment equals 4 percent and the actual rate of unemployment equals...

If the natural rate of unemployment equals 4 percent and the actual rate of unemployment equals 6 percent, then cyclical unemployment equals:

Multiple Choice

−2 percent.

10 percent.

2 percent.

6 percent.

Solutions

Expert Solution

Natural rate indicates the aggregate of frictional rate of unemployment and structural rate of unemployment.

Actual rate is the aggregate of natural rate and cyclical rate.

Therefore, in order to get the cyclical rate of unemployment, natural rate should be subtracted from actual rate.

Cyclical rate of unemployment = Actual rate – Natural rate

= 6% - 4%

= 2%

Answer: 3rd option

Rahul Sunny answered 1 month ago

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