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What is the natural rate of unemployment, and how does it relate to the concept of potential (or full-employment) GDP?
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Asked 4/28/2014 10:40:48 AM
Updated 4/28/2014 11:05:20 AM
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Unflagged by debnjerry [4/28/2014 11:02:28 AM], Flagged by debnjerry [4/28/2014 11:05:20 AM]
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User: What is the natural rate of unemployment, and how does it relate to the concept of potential (or full-employment) GDP?

Weegy: Natural rate of employment is the rate of unemployment at which the economy is said to be in practically full employment situation with regard to utilization of its labour and othere resouirce supply allowing for inevitable, [ minimum temporary adjustment unemployment without an economy would get into inflationary pressures. Potential Real Gross GDP is the Real GDP that is possible and sustainable to be geberated with full employment of rersouces after allowing for inevitable natural unemployment. For further elaboration of these concepts, please read further - - NATURAL UNEMPLOYMENT: is the combination of frictional and structural unemployment that persists in an efficient, expanding economy when labor and resource markets are in equilibrium. Natural unemployment exists when the economy is at full employment, which for practical purposes is defined as the condition in which the quantity of resources demanded is equal to the quantity of resources supplied. Most important for policy purposes, natural employment exists with stable prices, that is, no inflation. Frictional and structural unemployment are considered natural bi-products of a healthy, expanding economy. While they can be reduced through improved information, training, and education, total elimination is probably undesirable and likely impossible. The inherent tendency for an economy to have some degree of frictional and structural unemployment gives rise to the notion of natural unemployment. In principle, full employment exists when all resources (especially labor) are fully engaged in the production of goods and services, that is, full employment puts the economy ON the production possibilities frontier. However, in practice and in terms of macroeconomic policy, full employment is best viewed as the condition that exists after cyclical unemployment has been eliminated by preventing or correcting business-cycle contractions. This leaves frictional and structural unemployment (ignoring the seasonal variety which is largely irrelevant to macroeconomic policy). When policy makers use the term full employment, they do not mean that absolutely everyone one has a job at any given moment. ]
Expert answered|keketh23|Points 0|

Question
Asked 4/28/2014 10:40:48 AM
Updated 4/28/2014 11:05:20 AM
1 Answer/Comment
This conversation has been flagged as incorrect.
Unflagged by debnjerry [4/28/2014 11:02:28 AM], Flagged by debnjerry [4/28/2014 11:05:20 AM]
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