Chapter 9: Unemployment and its Natural Rate
Categories of Unemployment
• The problem of unemployment is usaully divided into two categories--the long-run
problem and the short run problem:
o The natural rate of unemployment
o The cyclical rate of unemployment
Natural Rate of Unemployment
• Unemployment that does not go away on its own even in the long run
• The amount of unemployment that the economy normally experiences
• Year-to-year fluctuations in unemployment around its natural rate
• Associated with the short-term ups and downs of the business cycle
• Three Basic Questions:
o How does government measure the economy's rate of unemployment?
o What problems arise in interpreting the unemployment data?
How long are the unemployed typically without work?
How is Unemployment Measured
Unemployment is mea