Which of the Following Is NOT True Regarding the Natural

question 169

Multiple Choice

Which of the following is NOT true regarding the natural rate of unemployment?

• A) The natural rate of unemployment equals the sum of the frictional and structural rates.
• B) If the economy is operating at the natural rate of unemployment,cyclical unemployment is equal to zero.
• C) The natural rate of unemployment correlates positively with the level of GDP growth in an economy.
• D) The actual rate of unemployment varies around the natural rate over time.

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Definitions:

Interest Rate Risk

The potential for investment losses due to fluctuations in interest rates.

Zero Coupon Treasury Bond

A government bond that does not pay interest throughout its life and is sold at a discount from the face value.

Reinvestment Rate Risk

The risk that the returns from reinvesting cash flows will be lower than expected due to changes in interest rate.

Market Interest Rate

The prevailing rate of interest available in the marketplace for securities of similar risk and maturity.