The concept of, and the factors which determine, the natural rate of unemployment
The natural rate of unemployment (NRU) is the level of unemployment that exists even when the economy runs normally. It includes people between jobs or whose skills no longer match available work.
Formula
NRU = Frictional Unemployment + Structural Unemployment (+ Voluntary)
Real World
The UK's NRU fell during the 2010s as the government expanded Universal Credit conditionality, shortened job-search periods, and rolled out apprenticeship schemes that reduced skills mismatches.
Exam Focus
Distinguish the NRU from zero unemployment — explaining that the NRU is non-zero even in a healthy economy secures a mark for conceptual precision.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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