When the quantity of labor supplied is equal to the quantity of labor demanded at the equilibrium wage rate,

Question

Quizplus · Accepted Answer

When the quantity of labor supplied is equal to the quantity of labor demanded at the equilibrium wage rate, it means that there is full employment in the economy. The economy is operating at its maximum potential level of output without creating inflationary pressures. Therefore, option B is the correct answer. Option A is incorrect since there can still be some unemployment due to factors such as structural and frictional unemployment. Option C is incorrect because frictional unemployment may still exist even in a situation of full-employment equilibrium. Option D is incorrect since the economy may be operating below or above the peak point during an inflationary period.

When the Quantity of Labor Supplied Is Equal to the Quantity