Definition
- Natural rate of unemployment
- The natural rate of unemployment is the rate of unemployment that would remain if the economy were neither booming nor in recession.
- Not to be confused with: Full employment
- Full employment is when the actual unemployment rate equals the natural rate, so some people are still out of work.
Test yourself
What is the difference between natural rate of unemployment and full employment?
Full employment is the state of the economy; the natural rate is the unemployment that remains in that state.