Natural rate of unemployment

Key Questions

  • Answer:

    The rate of unemployment consistent with the natural level of employment is called natural rate of unemployment


    Reaching zero level of unemployment is impossible even in the long run. But an economy can reach a natural level of employment at which the economy is at full employment output. A few people in the economy may remain unemployed at this equilibrium. This unemployment is consistent with natural level of employment. This is called natural rate of unemployment.

    There is one more version of this. It goes like this-
    The Natural Rate of Unemployment is one at which the inflation has no tendency to accelerate or decelerate - FEDERAL RESERVE
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