If the frictional rate of unemployment is 1.45%, the structural rate of unemployment is 2.3%, and the total unemployment rate is 6%, then we can conclude that:
A)there is 2.25% actual unemployment.
B)the labor force participation rate has fallen significantly.
C)the economy is experiencing an economic boom.
D)the equilibrium rate of unemployment is 3.75%.

Question

Quizplus · Accepted Answer

The equilibrium rate of unemployment is calculated by adding the frictional and structural rates of unemployment. Therefore, equilibrium rate of unemployment is (1.45% + 2.3%) = 3.75%. As the actual unemployment rate is higher than the equilibrium rate, the economy is experiencing cyclical unemployment.

If the Frictional Rate of Unemployment Is 1