Lesson Plan

• Define the natural rate of unemployment (NRU) and distinguish its frictional and structural components.
• Explain why the NRU is never zero and how it relates to labour‑market equilibrium.
• Interpret a labour‑market diagram to locate the NRU and calculate it using the formula u_N = u_F + u_S.
• Evaluate how supply‑side policies can shift the components of the NRU.

• Projector and screen
• Whiteboard and markers
• Printed handout with labour‑market diagram
• Worksheet containing calculation and policy questions
• Calculator (optional)

Begin with a headline about recent unemployment figures to capture interest. Ask students to recall the three types of unemployment they have studied and why some unemployment persists even at full employment. State that today they will pinpoint the “baseline” level of unemployment and learn how to read it on a diagram.

1. Do‑now (5 minutes): Quick quiz on frictional vs. structural unemployment (written on board).
2. Mini‑lecture (10 minutes): Present the definition of NRU, its formula u_N = u_F + u_S, and why it is not zero.
3. Diagram analysis (10 minutes): Using the handout, students label the labour‑supply, labour‑demand, equilibrium wage (W*), and the gap representing u_N. Teacher checks understanding with a few oral questions.
4. Group activity (15 minutes): Small groups examine a case study of a supply‑side policy (e.g., training programme) and discuss how it would affect u_F and u_S. Groups record their conclusions on the worksheet.
5. Check for understanding (5 minutes): Exit ticket: “State the NRU formula and give one policy that could lower it without causing inflation.”

Summarise that the NRU is the long‑run baseline unemployment comprising frictional and structural elements, visible as the gap in the labour‑market diagram. Collect exit tickets to gauge mastery and assign homework: research the current UK NRU and write a brief paragraph on which component (frictional or structural) appears dominant.