Which of the following situations describes cyclical unemployment?

1. Mary lost her job due to the recession, and is currently looking for work.
2. John is in between jobs as he searches for something better.
3. Sue worked for a popular company and lost her job after the company’s product was no longer in high demand.
4. Anne, a high-school dropout, recently lost her job and does not have any marketable skills.
5. Alfred recently moved across the country and is now searching for a new job.

The following table provides information about an economy’s population and labor market. Answer the questions based on this information. Round all answers, where appropriate, to one decimal place.

1. Calculate the labor force participation rate.
2. Calculate the economy’s unemployment rate.
3. If the natural rate of unemployment in this economy is four percent, is it more likely that the government and central bank will adopt expansionary or contractionary measures to adjust the economy back to full employment?

Which of the following does NOT primarily affect the natural rate of unemployment?

1. union bargaining power
2. downturns in the economy
3. excessive regulations on the expansion of businesses
4. minimum wage
5. the amount and duration of unemployment benefits