Question

Explain how the natural rate of unemployment may be higher in low-income countries.

Short answer

Natural rate of unemployment may be higher in low income countries.

Step-by-step solution

Step 1. Meaning of unemployment.

It is a situation found in a market whereby the demand for jobs is high, but the supply is low, thus causing a lack of jobs. It is used by economist to determine how healthy an economy can be. If the unemployment rate is high, it means economy is at worst.

Step 2. Reasons for higher natural rate of unemployment in low income countries.

a) In low income countries, a substantial number of workers in these economies provide many of their own needs by farming, fishing or hunting. They barter and trade with others and may take a succession of short- term or one day jobs.

b) In low income countries, the number of organized workplace is low as compare to the high- income countries.