The rate of unemployment when the economy is at its potential output is called the
A) full-employment rate of unemployment.
B) natural rate of unemployment.
C) structural rate of unemployment.
D) frictional rate of unemployment.

Question

Quizplus · Accepted Answer

When an economy is at its potential output, there will still be some level of unemployment due to factors such as job search and matching, and structural changes in the economy. This level of unemployment that occurs even when the economy is at full capacity is known as the natural rate of unemployment. Therefore, the correct answer is B) natural rate of unemployment.

The Rate of Unemployment When the Economy Is at Its