When the economy is at its natural unemployment rate, the cyclical unemployment rate is ______________ and the economy is said to be operating at _____________________.
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The natural unemployment rate is the level of unemployment that exists when the economy is at full employment, which includes frictional and structural unemployment but excludes cyclical unemployment. Show more…
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The rate of unemployment when the economy is not in recession, meaning it is producing full-potential GDP, is called the natural rate of unemployment (u*). If the rate of unemployment is below this, the economy is experiencing cyclical unemployment.
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