17-9 Natural Rate of Unemployment Recessionary gaps have high unemployment rates –Expansionary gaps have low unemployment rates The natural rate of unemployment, u*, is the sum of frictional and structural unemployment –Unemployment rate when cyclical unemployment is 0 –Occurs when Y is at Y* Cyclical unemployment is the difference between total unemployment, u, and u* –Recessionary gaps have u > u* –Expansionary gaps have u < u*
{}