1.What does the natural rate of unemployment refer to? Discuss. 2.What is the natural rate of...

1.What does the natural rate of unemployment refer to? Discuss.

2.What is the natural rate of unemployment equal to? Discuss.

3.Can the natural rate of unemployment ever change? If so, how? Discuss.

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The natural rate of unemployment is the rate that results from real factors. The natural rate of unemployment includes structural, frictional and surplus unemployment. This unemployment is found even in healthy economy.

2 As said it is equal to structural, frictional and surplus. Currently it is around 5-5.5% in usa.

3 yes natural rate of unemployment changes. Even Friedman says that it is changing rate not constant. It changes with economic forces or fundamentals. Even. Real structural factors like increase in real productive capacity will decrease natural rate of unemployment. It is influenced by supply side factors like labor market imperfections. Greater unemployment benefits relative to wage increases it and vice versa. Difficulty in receiving unemployment benefits increase it. Greater the minimum wage greater the natural rate and vice versa. Greater occupational mobility decreases it and vice versa. Greater skills of workers reduce it.

Rahul Sunny answered 1 year ago

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