Through my ec101 learning journey I have learnt some thing about natural rate of unemployment. So I would like to take this opportunity to briefly discuss about natural rate of unemployment.
Natural rate of unemployment is the unemployment rate when the economy is producing at its potential level of output (at full employment).
Natural rate of unemployment is unemployment arises from job search and skill mismatch in the labor market: That is frictional and structural unemployment. There will be no cyclical unemployment.
Natural rate of unemployment fluctuates over time due to changes in structure of the economy and labor market functions. Overall I would like to highlight a point, that when we are operating at potential level of output, it does not mean that there is no unemployment. Only cyclical unemployment doesn’t exist that time. However, frictional and structural unemployment does exist when an economy is producing at potential level of output. Current Trends of unemployment in