In your own words, briefly explain the distinctions between the terms “unemployment rate”, “natural rate of...

In your own words, briefly explain the distinctions between the terms “unemployment rate”, “natural rate of unemployment” and “cyclical unemployment rate”.

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Expert Solution

Unemployment rate

The percentage of number of unemployed or jobless workers of the entire labour crew is known as the unemployment rate . Both the employed and unemployed workers are comprised in the labour crew . If a worker does not work presently , he is considered as unemployed . Unemployment rate is written in terms of percentage .

unemployment rate = ( number of unemployed people / labour force ) × 100

Natural rate of unemployment

Natural rate of unemployment means the unemployment rate is minimised . It ensure full employment that doesn't mean it makes zero unemployment . It reduces the unemployment rate . People who were unemployed due to some problems like lack of skills and experience will get a chance of employment . It is a scenario where the unemployment rate of a economy will become lowest . The unemployment rate is stable .

Cyclical unemployment rate

We get Cyclic unemployment rate , when we subtract natural unemployment rate from current unemployment rate . When the economy's growth is high , the cyclical unemployment rate is low , whereas the economy's growth started to reduce , it increases the cyclical unemployment rate . Main reason for unemployment in an economy is cyclical unemployment .

cyclical unemployment rate = ( current unemployment rate - natural unemployment rate )

Rahul Sunny answered 1 year ago

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