When an economy is in full-employment equilibrium,
A)the natural rate of unemployment is zero.
B)there is no frictional unemployment.
C)cyclical unemployment is zero.
D)the unemployment rate is zero.

Question

Quizplus · Accepted Answer

Full-employment equilibrium means that the economy is producing at its maximum potential output and there is no cyclical unemployment. However, there may still be some level of natural or structural unemployment in the economy, which means that option A and B are incorrect. It is also unlikely that the unemployment rate would be zero, as there may still be some level of frictional or seasonal unemployment even when the economy is at full employment.

When an Economy Is in Full-Employment Equilibrium