The natural rate of unemployment includes which of the following types?

The natural rate of unemployment refers to the level of unemployment that arises from the normal functioning of the labor market, excluding cyclical unemployment caused by economic downturns. It encompasses two main types of unemployment: frictional and structural.

Frictional unemployment occurs when individuals are temporarily without a job while transitioning from one position to another or entering the workforce for the first time. It reflects the time taken for job seekers to find positions that fit their skills and preferences.

Structural unemployment results from shifts in the economy that create a mismatch between the skills of the labor force and the demands of employers. This type often arises due to technological changes, industry declines, or geographical shifts that necessitate a change in workforce skills.

Including both frictional and structural unemployment presents a comprehensive view of the natural rate of unemployment, as it captures the inefficiencies in the job market that are inherent even in a healthy economy. Real wage unemployment is typically associated with wage rigidity and does not fall under the definition of the natural rate, particularly in the context of macroeconomic trends.

Thus, the answer correctly encompasses frictional and structural unemployment as integral components of the natural rate of unemployment.