The U.S. economy suffered a long period of recession triggered from the sub-prime mortgage crisis since 2007. Her unemployment rate stayed at a high level for an extended period of time.

a. What is natural rate of unemployment? Explain the TWO main causes of the natural rate of unemployment. (7 marks)

b. One effect of the sub-prime mortgage crisis is that people in the U.S. cannot move away from their old houses as easily. With reference to your answer in (a), explain how this would affect the natural rate of unemployment in the U.S.