Question : The natural rate of unemployment refers to the:
Option 1: Rate of unemployment that prevails when the economy is at full employment
Option 2: Rate of unemployment that prevails during a recession
Option 3: Rate of unemployment that prevails during inflation
Option 4: Rate of unemployment that prevails during deflation
Correct Answer: Rate of unemployment that prevails when the economy is at full employment
Solution : The correct answer is (a) The rate of unemployment that prevails when the economy is at full employment
The natural rate of unemployment, also known as the non-accelerating inflation rate of unemployment (NAIRU), represents the level of unemployment that exists when the labor market is in equilibrium and the economy is operating at its potential output. It is the rate of unemployment consistent with stable inflation and occurs when there is no cyclical unemployment or deviation from full employment.
The natural rate of unemployment includes structural and frictional unemployment, which are considered to be unavoidable in a dynamic economy. It excludes cyclical unemployment, which is the unemployment caused by fluctuations in the business cycle.
Question : The natural rate of unemployment refers to the unemployment rate:
Option 1: During a recessionary period
Option 2: During an inflationary period
Option 3: At which there is no cyclical unemployment
Option 4: At which there is maximum employment
Question : A recession is characterized by:
Option 1: High inflation and high unemployment
Option 2: Low inflation and high unemployment
Option 3: High inflation and low unemployment
Option 4: Low inflation and low unemployment
Question : The concept of the natural rate hypothesis suggests that:
Option 1: Unemployment will eventually return to its natural rate
Option 2: Unemployment can be permanently reduced through government intervention
Option 3: Inflation can be permanently reduced through government intervention
Option 4: Inflation and unemployment are unrelated
Question : Automatic stabilizers refer to:
Option 1: Government policies that automatically stabilize the economy during a recession
Option 2: Business practices that automatically stabilize the economy during a recession
Option 3: Changes in interest rates that automatically stabilize the economy during a recession
Option 4: Changes in tax rates that automatically stabilize the economy during a recession
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