CFA Practice Question

CFA Practice Question

Regarding actual unemployment rate and natural unemployment rate:

I. The actual rate generally rises above the natural rate during a recession.
II. The actual rate generally falls below the natural rate during a recession.
III. The actual rate generally rises above the natural rate during an economic boom.
IV. The actual rate generally falls below the natural rate during an economic boom.
V. The actual rate generally remains the same as the natural rate during a recession.
VI. The actual rate generally remains the same as the natural rate during an economic boom.

Which statement(s) is (are) correct?
A. I and IV.
B. II and III.
C. I and VI.
Explanation: The actual rate fluctuates around the natural rate, in response to cyclical economic condition. During the past four decades the actual rate of unemployment generally rises above the natural rate during a recession and falls below the natural rate when the economy is in the midst of an economic boom.

User Contributed Comments 7

User Comment
danlan It can fall below the natural rate!
dealsoutlook yup..obviously just temporarily
MBCs ugh -- UNemployment not employment
rhardin How many questions am I going to miss before I learn to READ THE QUESTION?!?! Ugh.
cwest020 natural unemployment is about 5%, in a boom we can have 2% unemployment.
ColonelCFA Not reading the questions... gets me every time...
birdperson i did the same thing... lol
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