The natural rate of unemployment is defined as the rate of unemployment that
A)prevails in long-run macroeconomic equilibrium,when all workers and employers have fully adjusted to any changes in the economy.
B)prevails in the short-run macroeconomic equilibrium,before workers and employers have had a chance to adjust to an economic shock.
C)exists due to welfare and employment benefits that reduce potential workers' incentives to find work.
D)exists only during periods of recession or depression in the economy.

Question

Quizplus · Accepted Answer

The natural rate of unemployment refers to the level of unemployment that exists in the long-run macroeconomic equilibrium. It is the rate of unemployment that occurs when all workers and employers have fully adjusted to any changes in the economy, and there are no cyclical factors causing unemployment. It is also known as the non-accelerating inflation rate of unemployment (NAIRU). B and D are incorrect because they refer to short-run fluctuations in unemployment, whereas the natural rate applies to the long run. C is incorrect because the natural rate of unemployment is not influenced by welfare or other benefits.

The Natural Rate of Unemployment Is Defined as the Rate