The natural rate of unemployment when there is a change in the various types of unemployment. Concept Introduction: Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Question

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Answer 1

Question

Chapter 10, Problem 1P

Sub-part

A

To determine

The natural rate of unemployment when there is a change in the various types of unemployment.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

A

Expert Solution

Explanation of Solution

The natural unemployment rate is all unemployment other than cyclical. That implies it as the sum of frictional, seasonal, and structural unemployment. So cyclical unemployment is 2% + 2% + 0.5% = 4.5%

The cyclical unemployment rate is zero under natural rate of unemployment. Since the cyclical unemployment is 2%, so the economy is operating at 2% percent less than its potential GDP.

Sub-part

B

To determine

The natural rate of unemployment when there is a rise in the cyclical unemployment keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

B

Expert Solution

Explanation of Solution

Natural rate of unemployment remains unchanged with cyclical GDP going upto 3%. Since the cyclical unemployment is 3%, so the economy is operating at 3% percent less than its potential GDP.

Sub-part

C

To determine

The natural rate of unemployment when structural unemployment falls keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

C

Expert Solution

Explanation of Solution

Natural rate of unemployment will reduce to 4% as structural unemployment reduces to 1.5% from 2%. Cyclical unemployment remains the same, but natural rate of unemployment is now 45. So it is 0.5 % closer to potential GDP.

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Students have asked these similar questions

Problem 2. The population of the economy is equal to 100. Forty percent of the population are not in the labor force. Six percent of the population are unemployed. 1. What is the unemployment rate in this economy? 2. Suppose that the number of people out of the labor force is constant, so that all movements in the labor market are between employment and unemployment. The share of the unemployed who find employment is equal to 18% in each period, and the share of the employed who lose their jobs is equal to 2% in each period. According to the bathtub model, what is the natural rate of unemployment? 3. The government considers a law that would raise the cost of firing workers. As a result, the job separation rate is expected to decline to just 1% per period. However, the law makers are worried about a potential side-effect of the policy: firms might become less willing to hire people leading to a decline in the job finding rate. How much should the job finding rate decline in order to…

9. _______________________ happens when the economy is producing at its potential and unemployment is at the natural rate of unemployment. (A) The foreign price effect (B) Stagflation (C) Full employment GDP (D) The interest rate effect

12 Suppose 20 million people are employed, and 5 million are unemployed. What is the unemployment rate? Does that number change if we also state that there are an additional 30 million people who are not in the civilian labor force?

Answer 2

Question

Chapter 10, Problem 1P

Sub-part

A

To determine

The natural rate of unemployment when there is a change in the various types of unemployment.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

A

Expert Solution

Explanation of Solution

The natural unemployment rate is all unemployment other than cyclical. That implies it as the sum of frictional, seasonal, and structural unemployment. So cyclical unemployment is 2% + 2% + 0.5% = 4.5%

The cyclical unemployment rate is zero under natural rate of unemployment. Since the cyclical unemployment is 2%, so the economy is operating at 2% percent less than its potential GDP.

Sub-part

B

To determine

The natural rate of unemployment when there is a rise in the cyclical unemployment keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

B

Expert Solution

Explanation of Solution

Natural rate of unemployment remains unchanged with cyclical GDP going upto 3%. Since the cyclical unemployment is 3%, so the economy is operating at 3% percent less than its potential GDP.

Sub-part

C

To determine

The natural rate of unemployment when structural unemployment falls keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

C

Expert Solution

Explanation of Solution

Natural rate of unemployment will reduce to 4% as structural unemployment reduces to 1.5% from 2%. Cyclical unemployment remains the same, but natural rate of unemployment is now 45. So it is 0.5 % closer to potential GDP.

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Answer 3

Question

Chapter 10, Problem 1P

Sub-part

A

To determine

The natural rate of unemployment when there is a change in the various types of unemployment.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

A

Expert Solution

Explanation of Solution

The natural unemployment rate is all unemployment other than cyclical. That implies it as the sum of frictional, seasonal, and structural unemployment. So cyclical unemployment is 2% + 2% + 0.5% = 4.5%

The cyclical unemployment rate is zero under natural rate of unemployment. Since the cyclical unemployment is 2%, so the economy is operating at 2% percent less than its potential GDP.

Sub-part

B

To determine

The natural rate of unemployment when there is a rise in the cyclical unemployment keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

B

Expert Solution

Explanation of Solution

Natural rate of unemployment remains unchanged with cyclical GDP going upto 3%. Since the cyclical unemployment is 3%, so the economy is operating at 3% percent less than its potential GDP.

Sub-part

C

To determine

The natural rate of unemployment when structural unemployment falls keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

C

Expert Solution

Explanation of Solution

Natural rate of unemployment will reduce to 4% as structural unemployment reduces to 1.5% from 2%. Cyclical unemployment remains the same, but natural rate of unemployment is now 45. So it is 0.5 % closer to potential GDP.

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Answer 4

Question

Chapter 10, Problem 1P

Sub-part

A

To determine

The natural rate of unemployment when there is a change in the various types of unemployment.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

A

Expert Solution

Explanation of Solution

The natural unemployment rate is all unemployment other than cyclical. That implies it as the sum of frictional, seasonal, and structural unemployment. So cyclical unemployment is 2% + 2% + 0.5% = 4.5%

The cyclical unemployment rate is zero under natural rate of unemployment. Since the cyclical unemployment is 2%, so the economy is operating at 2% percent less than its potential GDP.

Sub-part

B

To determine

The natural rate of unemployment when there is a rise in the cyclical unemployment keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

B

Expert Solution

Explanation of Solution

Natural rate of unemployment remains unchanged with cyclical GDP going upto 3%. Since the cyclical unemployment is 3%, so the economy is operating at 3% percent less than its potential GDP.

Sub-part

C

To determine

The natural rate of unemployment when structural unemployment falls keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

C

Expert Solution

Explanation of Solution

Natural rate of unemployment will reduce to 4% as structural unemployment reduces to 1.5% from 2%. Cyclical unemployment remains the same, but natural rate of unemployment is now 45. So it is 0.5 % closer to potential GDP.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 10, Problem 1P

Sub-part

A

To determine

The natural rate of unemployment when there is a change in the various types of unemployment.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

A

Expert Solution

Explanation of Solution

The natural unemployment rate is all unemployment other than cyclical. That implies it as the sum of frictional, seasonal, and structural unemployment. So cyclical unemployment is 2% + 2% + 0.5% = 4.5%

The cyclical unemployment rate is zero under natural rate of unemployment. Since the cyclical unemployment is 2%, so the economy is operating at 2% percent less than its potential GDP.

Sub-part

B

To determine

The natural rate of unemployment when there is a rise in the cyclical unemployment keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

B

Expert Solution

Explanation of Solution

Natural rate of unemployment remains unchanged with cyclical GDP going upto 3%. Since the cyclical unemployment is 3%, so the economy is operating at 3% percent less than its potential GDP.

Sub-part

C

To determine

The natural rate of unemployment when structural unemployment falls keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

C

Expert Solution

Explanation of Solution

Natural rate of unemployment will reduce to 4% as structural unemployment reduces to 1.5% from 2%. Cyclical unemployment remains the same, but natural rate of unemployment is now 45. So it is 0.5 % closer to potential GDP.

Answer 6

Chapter 10, Problem 1P

Sub-part

A

To determine

The natural rate of unemployment when there is a change in the various types of unemployment.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

A

Expert Solution

Explanation of Solution

The natural unemployment rate is all unemployment other than cyclical. That implies it as the sum of frictional, seasonal, and structural unemployment. So cyclical unemployment is 2% + 2% + 0.5% = 4.5%

The cyclical unemployment rate is zero under natural rate of unemployment. Since the cyclical unemployment is 2%, so the economy is operating at 2% percent less than its potential GDP.

Answer 7

Chapter 10, Problem 1P

Sub-part

A

To determine

The natural rate of unemployment when there is a change in the various types of unemployment.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Answer 8

Sub-part

A

Expert Solution

Explanation of Solution

The natural unemployment rate is all unemployment other than cyclical. That implies it as the sum of frictional, seasonal, and structural unemployment. So cyclical unemployment is 2% + 2% + 0.5% = 4.5%

The cyclical unemployment rate is zero under natural rate of unemployment. Since the cyclical unemployment is 2%, so the economy is operating at 2% percent less than its potential GDP.

Answer 9

Sub-part

A

Expert Solution

Answer 10

Sub-part

A

Expert Solution

Answer 11

Expert Solution

Answer 12

Sub-part

B

To determine

The natural rate of unemployment when there is a rise in the cyclical unemployment keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

B

Expert Solution

Explanation of Solution

Natural rate of unemployment remains unchanged with cyclical GDP going upto 3%. Since the cyclical unemployment is 3%, so the economy is operating at 3% percent less than its potential GDP.

Answer 13

Sub-part

B

To determine

The natural rate of unemployment when there is a rise in the cyclical unemployment keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Answer 14

Sub-part

B

Expert Solution

Explanation of Solution

Natural rate of unemployment remains unchanged with cyclical GDP going upto 3%. Since the cyclical unemployment is 3%, so the economy is operating at 3% percent less than its potential GDP.

Answer 15

Sub-part

B

Expert Solution

Answer 16

Sub-part

B

Expert Solution

Answer 17

Expert Solution

Answer 18

Sub-part

C

To determine

The natural rate of unemployment when structural unemployment falls keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

C

Expert Solution

Explanation of Solution

Natural rate of unemployment will reduce to 4% as structural unemployment reduces to 1.5% from 2%. Cyclical unemployment remains the same, but natural rate of unemployment is now 45. So it is 0.5 % closer to potential GDP.

Answer 19

Sub-part

C

To determine

The natural rate of unemployment when structural unemployment falls keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Answer 20

Sub-part

C

Expert Solution

Explanation of Solution

Natural rate of unemployment will reduce to 4% as structural unemployment reduces to 1.5% from 2%. Cyclical unemployment remains the same, but natural rate of unemployment is now 45. So it is 0.5 % closer to potential GDP.