<p>The natural unemployment rate is related to two other important concepts: full employment and potential real GDP. The economy is considered to be at full employment when the actual unemployment rate is equal to the natural unemployment. When the economy is at full employment, real GDP is equal to potential real GDP.</p>
<p>By contrast, when the economy is below full employment, the unemployment rate is greater than the natural unemployment rate and real GDP is less than potential. Finally, when the economy above full employment, then the unemployment rate is less than the natural unemployment rate and real GDP is greater than potential. Operating above potential is only possible for a short while, since it is analogous to all workers working overtime.</p>

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Natural Unemployment and Potential Real GDP

Economics studies social behavior guiding the allocation of scarce resources to meet the unlimited needs and desires of the individual members of a given society, and for the production of goods and services, growth of production and welfare over time, and a great variety of other complex issues of vital concern to society. 

Economics

Discover how the unemployment rate is calculated, who is considered in the labor force, and the different types of unemployment such as cyclical, structural, and frictional, in addition to exploring international unemployment comparisons and potential public policies to fight unemployment.


Natural Unemployment and Potential Real GDP

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