2 A. What is the natural rate of Unemployment? What are the causes of this kind...

2 A. What is the natural rate of Unemployment? What are the causes of this kind of Unemployment? Describe any one of the causes of natural rate of unemployment in detail.

2 B. (GRAPH IS MANDATORY) You can upload the graph as a file (Draw the graph/Take a picture)

3. RESPONSE (T OR F) AND CORRECT EXPLANATION.

(a) Malthus was pessimistic about nations’ economic growth.

(b) French riots in March 2006 happened due to reform in International Trade laws.

Solutions

Expert Solution

2 A. What is the natural rate of Unemployment? What are the causes of this kind of Unemployment? Describe any one of the causes of natural rate of unemployment in detail.

Unemployment is a condition wherein a person willing and able to work is not able to find a job.

Whenever the economy produces its full employment level of output there is still some unemployment, known as the natural rate of unemployment.

In natural rate of unemployment there are three sub-types:

a. Structural unemployment.: When economy undergoes a change. Ex. Typewriters are replaced by computers and people need to learn this skill. It may also happen if industry changes location then people in original location will be unemployed. If labor laws are stringent the also it leads to labor market rigidities and industrialists will think of changing job locations.

b. Frictional unemployment.: This occurs when people are in between jobs and if there are jobs but people do not have information about the same.

c. Seasonal unemployment: A tourist guide in hill station during extreme rainy days may be jobless.

2 B. (GRAPH IS MANDATORY) You can upload the graph as a file (Draw the graph/Take a picture)

The following figure explains that during recessionary gap the unemployment rate is greater than natural rate. During economy at full potential the natural rate of unemployment is equal to natural rate. At inflationary gap the natural rate of unemployment is greater than natural rate.

This happens because recessionary cycle shows there is no enough demand in the market and people apart from naturally unemployed will also be jobless. During inflationary gap only naturally unemployed people will exist.

Rahul Sunny answered 1 year ago

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