What types of unemployment can exist in an economy that is at its potential output level?
A) only cyclical unemployment
B) only structural unemployment
C) frictional, cyclical, and seasonal unemployment
D) frictional, seasonal, and structural unemployment

Question

What types of unemployment can exist in an economy that is at its potential output level?  
A) only cyclical unemployment 
B) only structural unemployment 
C) frictional, cyclical, and seasonal unemployment 
D) frictional, seasonal, and structural unemployment

Quizplus · Accepted Answer

While a fully functioning economy at its potential output level might eliminate cyclical unemployment where individuals lose their jobs due to insufficient demand, there may still be a natural level of frictional or seasonal unemployment, and structural unemployment brought about by some market inefficiencies or skills mismatches. Therefore, D is the best choice as it covers all possible forms of unemployment in this scenario.

What Types of Unemployment Can Exist in an Economy That