The natural rate of unemployment is the level of unemployment that exists when the economy is at full capacity, representing the sum of frictional and structural unemployment. It reflects a situation where all those who are willing and able to work can find employment, but there will still be some individuals temporarily unemployed due to job transitions or mismatches in skills. This rate is crucial for understanding the long-term sustainability of economic growth and is influenced by factors such as labor market policies, technology, and demographics.
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