Discuss how the age composition of the labor force and other demographic and social factors can cause the natural rate of unemployment to vary over time. For 2012, economists at the Congressional Budget Office have estimated a natural rate of 5.5%.
What will be an ideal response?
Ans. Natural rate of unemployment refers to that rate of unemployment in an economy during equilibrium and includes Frictional and Structural Unemployment. The factors like : Age composition , Demographic Structure and other Social Factors can cause a change in the Natural Rate if Unemployment. More the number of youths , wifes etc in the workforce , more are the chances of Natural Unemployment because they tend to shift from their Work from Time to time. The young population moves from one job to another a lot , Causing Natural Unemployment to increase. Wealthy children or wifes certainly won't mind to remain unemployed for certain period of the year and thus wealth also plays a major role here. Attitude of the individual towards work also effects natural level of unemployment. Hence we can clearly conclude that All these Factors combined , have a major impact on the Natural Level of Unemployment.
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