Question

What forces create the natural rate of unemployment for an economy?

Short answer

There are various different forces that create the natural rate of unemployment.

Step-by-step solution

Step 1. Definition

In an economy the workers may come and go and always look for a better job, the period of joblessness in which the workers are looking for a job is called the natural level of unemployment.

Step 2. Explanation

The natural rate of unemployment is created by frictional and structural unemployment.

Step 3. Components

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.