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Assignment: The Natural Rate of Unemployment
1. Has the U.S. economy achieved approximate full employment yet? Explain how we define ‘full employment' and how you can tell whether or not that goal has been achieved. Use appropriate data to support your answer (see below). Be sure to cite the sources of your data in your essay.
- Use the Federal Reserve Bank of St. Louis' estimate of the Natural Rate of Unemployment (short-term) at https://research.stlouisfed.org/fred2/series/NROUST Drag your cursor across the graph to find the estimate of the natural rate of unemployment for the first quarter of 2017 (2017
Q1). (The graph shows estimates of the natural rate from 1950 to 2024).
- Use the Bureau of Labor Statistics website (bls.gov) to find the most recent estimate of the actual unemployment rate.
2. Read the Introduction to the article "A Search and Matching Approach to Labor Markets: Did the Natural Rate of Unemployment Rise?" by Mary C. Daly, Bart Hobijn, Aysegul Sahin, and Robert G. Vallet. (Read pages 3, 4, and 5 of the original document (= the first three pages of the pdf file)). How do the authors explain the increase in the Natural Rate of Unemployment during and after the financial crisis (from 2007 to 2012)?
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