Question

Explain why the actual unemployment rate might depart from its natural rate.

Short answer

In the short run, an unexpected drop in aggregate demand can depress real GDP, pushing the actual unemployment rate over the natural rate.

Step-by-step solution

Step :1 Introduction 

The natural rate of unemployment, often known as natural income inequality, is the lowest level of unemployment caused by genuine or voluntary economic forces. Cyclical unemployment refers to the amount of persons who are jobless as a result of the labour force's architecture, such as those who have been displaced by automation or who lack the necessary skills to find work.

Step :2 Explanation 

In the long run, an unanticipated increase in aggregate demand might lead real GDP to rise, lowering the unemployment rate below the natural rate of unemployment. Similarly, an unexpected drop in aggregate demand might push real GDP down in the near run, causing the actual unemployment rate to increase above the natural rate.