Chapter 13, Problem 4MCQ

To determine

The question requires us to determine the true option for the natural rate of unemployment.

Explanation of Solution

The unemployment rate that occurs from the effects of structural unemployment and frictional unemployment is considered the natural rate of unemployment.

So, the natural rate of unemployment consists of frictional unemployment (that occurs during the time workers spend searching for a suitable job according to their skill and wage requirement) and structural unemployment (that occurs when workers available for work lack the skills required for the job).

Therefore, the natural rate of unemployment includes frictional unemployment.

Option “a” is correct.

The other options are incorrect because

• Cyclical unemployment is part of actual unemployment not the natural rate of unemployment
• The natural rate of unemployment is not equal to zero percent because a certain number of frictionally unemployed workers are expected always in the economy.