Principles of Macroeconomics / Unit 16 MAC 1513 short lesson, about 20 seconds
Cyclical or Natural Rate
Captions available
The idea
Unemployment anywhere is either cyclical, meaning output is below potential, or natural rate, meaning labour-market institutions. The remedy differs completely, so the diagnosis comes first.
In practice
Cyclical unemployment falls when demand recovers; natural-rate unemployment does not.
Where people slip
Treating one as the other prescribes a remedy that cannot work.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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