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
Correct Answer: At which there is no cyclical unemployment
Solution : The correct answer is (c) At which there is no cyclical unemployment.
The natural rate of unemployment is also known as the non-accelerating inflation rate of unemployment (NAIRU). It represents the level of unemployment that exists in an economy when it is operating at its potential output or full employment level. At this rate, there is no cyclical unemployment, which refers to the unemployment caused by fluctuations in economic activity or business cycles.
The natural rate of unemployment includes structural and frictional unemployment, which are considered as part of the normal functioning of the labor market. Structural unemployment arises from changes in the structure of the economy, such as technological advancements or shifts in industries, which require workers to acquire new skills or find employment in different sectors. Frictional unemployment, on the other hand, occurs when individuals are transitioning between jobs or entering the labor force for the first time.
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
Question : A situation in which a person is not willing to work at the existing wage rate.
Option 1: full employment
Option 2: Involuntary unemployment
Option 3: voluntary unemployment
Option 4: none of these
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 : If aggregate demand exceeds aggregate supply, the economy is likely to experience:
Option 1: Inflationary pressure
Option 2: Deflationary pressure
Option 3: Recessionary pressure
Option 4: Stagflation
Question : If aggregate supply exceeds aggregate demand, the economy is likely to experience:
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