Figure 7-6
-Refer to Figure 7-6. Suppose the economy is initially at point A. All of the following statements are true except
A) the economy is in equilibrium at its potential output.
B) the labor market is in equilibrium.
C) there is no cyclical unemployment.
D) there is no structural or frictional unemployment.

Question

Figure 7-6 
-Refer to Figure 7-6. Suppose the economy is initially at point A. All of the following statements are true except
A) the economy is in equilibrium at its potential output. 
B) the labor market is in equilibrium. 
C) there is no cyclical unemployment. 
D) there is no structural or frictional unemployment.

Quizplus · Accepted Answer

There may still be structural or frictional unemployment even if the economy is at potential output and in equilibrium at point A. Structural unemployment occurs when there is a mismatch between the skills of workers and the available jobs in the market. Frictional unemployment occurs when workers are in between jobs or searching for a better job. These forms of unemployment can exist even when the labor market is in equilibrium.

Figure 7-6 -Refer to Figure 7-6. Suppose the Economy Is Initially at Is