The seasonally adjusted rate of unemployment in Hamsterville is $7 \%$. But the natural rate of unemployment there is $5 \%$.

Which of the following describes why there is a difference between the current rate of unemployment and the natural rate of unemployment?

Choose 1 answer:
(A) There is $2 \%$ Cyclical unemployment
(B) There is $2 \%$ Structural unemployment
(C) There is $2 \%$ frictional unemployment
(D) There is $2 \%$ seasonal unemployment
(E) We need more information to determine why there is a difference

Question

The seasonally adjusted rate of unemployment in Hamsterville is $7 \%$. But the natural rate of unemployment there is $5 \%$.

Which of the following describes why there is a difference between the current rate of unemployment and the natural rate of unemployment?

Choose 1 answer:
(A) There is $2 \%$ Cyclical unemployment
(B) There is $2 \%$ Structural unemployment
(C) There is $2 \%$ frictional unemployment
(D) There is $2 \%$ seasonal unemployment
(E) We need more information to determine why there is a difference

Accepted Answer

***A*** ∻Key Concept∻ ⚹Cyclical Unemployment⚹ ∻Explanation∻ ⚹The difference between the seasonally adjusted rate of unemployment and the natural rate of unemployment is due to cyclical unemployment, which is associated with economic recessions and expansions. When the economy is below its potential output, cyclical unemployment occurs, leading to a higher actual unemployment rate compared to the natural rate.⚹◊What impact does the difference between the current rate of unemployment and the natural rate of unemployment have on the economy in Hamsterville?⍭ Generate me a similar question◊

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