When an economy is operating at its full employment rate of output,
A)the rate of unemployment will be zero.
B)output will exceed the economy's maximum sustainable rate.
C)the actual rate of unemployment will equal the natural rate.
D)the economy's potential rate of output will exceed actual GDP.

Question

Quizplus · Accepted Answer

When the economy is operating at its full employment rate of output, there will still be unemployment due to frictional and structural factors, which make up the natural rate of unemployment. Therefore, the actual rate of unemployment will equal the natural rate.

When an Economy Is Operating at Its Full Employment Rate