Question

What term describes the remaining level of unemployment that occurs even when the economy is healthy?

Short answer

The natural level of unemployment describes this situation.

Step-by-step solution

Step 1. Definition

Frictional unemployment is the period when a worker is chosen to leave their job in search of the new one and the workers join the workforce for the first time.

Structural unemployment is a type of involuntary unemployment which is caused due to the mismatch between the workers and skills required and this is also called the skill gap.

Step 2. Explanation

When the economy is healthy and doing well the remaining level of unemployment is described by the natural level of unemployment.

Step 3. Natural rate of employment

The labor market is incomplete equilibrium when there is a natural level of unemployment and this occurs because of frictional and structural unemployment.

Even the fully developed economies also have a natural rate of unemployment because in an economy the workers may come and go and always look for a better job, the period in which the workers are looking for a job is called the natural level of unemployment.