The question requires us to determine the factors affecting the natural rate of
Explanation of Solution
The unemployment rate that occurs from the effects of structural unemployment and frictional unemployment is considered the natural rate of unemployment.
So, the natural rate of unemployment consists of frictional unemployment (that occurs during the time workers spend searching for a suitable job according to their skill and wage requirement) and structural unemployment (that occurs when workers available for work lack the skills required for the job).
The following are the factors that affect the natural rate of unemployment:
- Change in characteristics of the labor force due to changes in age, education, skill, and work experience.
- Change in institutions for the labor market like ‘labor unions.
- Change in government policies such as minimum wage law and job training programs.
- Technological improvement eases job-searching processes.
Therefore, all the given options can affect the natural rate of unemployment.
Option “e” is correct.
Chapter 13 Solutions
Krugman's Economics For The Ap® Course
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