Problem 6 What is "natural" about natural ... [FREE SOLUTION]

Chapter 6: Problem 6

What is "natural" about natural unemployment?

Short Answer

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The term 'natural' in natural unemployment implies that this type of unemployment is a regular and expected part of any healthy economy, caused by unavoidable factors such as workers changing jobs (frictional unemployment) or changes in required skills due to technological advances (structural unemployment).

Step by step solution

Understanding the Meaning of 'Natural' in 'Natural Unemployment'

The term 'natural' in Natural Unemployment refers to the fact that some degree of unemployment is expected in any healthy economy. This is not due to economic downturns or management decisions, but to inevitable factors such as changes in work force or technology.

Enumerate the Causes of Natural Unemployment

The causes of natural unemployment include frictional and structural unemployment. Frictional unemployment refers to the period of job search, or the time taken to move from one job to another. Structural unemployment refers to a mismatch between the skills of the unemployed and the skills required for available jobs.

Summarizing the Concept of Natural Unemployment

It's important to note that Natural Unemployment does not indicate a problem in an economic system, but is rather a part of any healthy economy. The level of natural unemployment varies from country to country and from time to time, depending on structural changes in the economy.