Asked by Ranjani Ramaswamy on Jul 01, 2024
Verified
The figure below reflects the inverse relationship between the inflation rate and the unemployment rate.The figure shows that the natural rate of unemployment is:
A) 2 percent.
B) 1 percent.
C) 4 percent.
D) 8 percent.
E) 10 percent.
Natural Rate of Unemployment
The level of unemployment that is expected in an economy without temporary fluctuations, often seen as the equilibrium state of the labor market.
Inverse Relationship
A situation where two variables move in opposite directions, meaning when one variable increases, the other decreases.
- Comprehend the inherent rate of unemployment and its importance.
Verified Answer
KW
Kendyl WilliamsJul 06, 2024
Final Answer :
C
Explanation :
The natural rate of unemployment is the rate at which there is no cyclical unemployment, that is, the unemployment rate when the economy is at full employment. From the figure, we can see that the natural rate of unemployment is around 4%, as this is the point where the Phillips curve intersects with the long-run vertical axis. Therefore, the answer is C.
Learning Objectives
- Comprehend the inherent rate of unemployment and its importance.