Full employment, or potential output, refers to the real GDP that can be produced in the economy when there is no:
A) unemployment.
B) cyclical unemployment.
C) structural unemployment.
D) frictional unemployment.

Question

Quizplus · Accepted Answer

Full employment, or potential output, refers to the level of real GDP that can be produced when the economy is at its highest sustainable level of employment, which allows for the natural rate of unemployment. This includes frictional and structural unemployment but excludes cyclical unemployment, which is associated with economic downturns. Cyclical unemployment is the only type of unemployment that can be reduced in a fully employed economy without causing inflation.

Full Employment, or Potential Output, Refers to the Real GDP