Question

Suppose that among the 15 million unemployed people in Problem 7-17, currently, 6.9 million are frictionally unemployed, 5.9 million are cyclically unemployed, and 2.2 million are structurally unemployed. What is the natural rate of unemployment?

Short answer

The natural rate of unemployment$5.2\%$.

Step-by-step solution

Given Information

Employment rates are,

frictionally unemployed$=6.9$million

structurally unemployed $=2.2$million

labour force$=15$million

explanation

Now,

Natural unemployment rate =

$\frac{frictional+structural}{labourforce}\times 100$

$$\begin{gathered} \Rightarrow \frac{(6.9+2.2)}{15}\times 100 \\ =5.2\% \end{gathered}$$

The natural rate of unemployment is$5.2\%$