If cyclical unemployment is eliminated
A) GDP is at its full-employment level
B) GDP is at its equilibrium level
C) the loanable funds market is in equilibrium
D) the aggregate supply curve shifts upward
E) potential output has increased

Question

Quizplus · Accepted Answer

Cyclical unemployment represents the difference between actual and potential output, so if it is eliminated, then the economy is producing at its full-employment level of output, which is the point at which there is no cyclical unemployment. Therefore, the best choice is A, and the other choices are not necessarily affected or logically connected to this outcome.

If Cyclical Unemployment Is Eliminated