# Unemployment equal to it's natural state - Graphing Help

• Feb 24th 2014, 04:13 PM
michellederz
Unemployment equal to it's natural state - Graphing Help
Attachment 30243

In which years was the unemployment rate equal to its natural rate?
would it be years 1, 4, and 5?
• Feb 24th 2014, 04:17 PM
HallsofIvy
Re: Unemployment equal to it's natural state - Graphing Help
You give graphs for "potential" and "actual" but it is impossible to tell what you mean by "natural" rate. Some defiitions would be helpful.
• Feb 24th 2014, 04:25 PM
michellederz
Re: Unemployment equal to it's natural state - Graphing Help
Quote:

Originally Posted by HallsofIvy
You give graphs for "potential" and "actual" but it is impossible to tell what you mean by "natural" rate. Some defiitions would be helpful.

And you see, that is the issue. I do not know what the question means by "natural" rate either. My professor did not go over this in class which is why I am confused..
• Feb 24th 2014, 05:02 PM
romsek
Re: Unemployment equal to it's natural state - Graphing Help
• Feb 26th 2014, 01:28 PM
JeffM
Re: Unemployment equal to it's natural state - Graphing Help
Quote:

Originally Posted by michellederz
And you see, that is the issue. I do not know what the question means by "natural" rate either. My professor did not go over this in class which is why I am confused..

The "natural rate of unemployment" is a conceptual construct about long-term equilibrium. For a brief introduction, please see: Natural rate of unemployment - Wikipedia, the free encyclopedia

Measuring the rate operationally (if that can even be done) will presumably depend on a technical definition, and there may be more than one in the literature.

I am guessing, however, that the assumption behind this question is that unemployment is at its "natural rate" when the economy is producing at its average long-term potential. Whether that assumption has any empirical validity is a different question. See if there is anything in the text that seems consistent with that assumption.
• Mar 22nd 2014, 06:42 AM
monim1
Re: Unemployment equal to it's natural state - Graphing Help
I am confused about your question. In you graph which one is natural rate? It is not clear to me.