Which of the following is true when the economy is in full-employment condition?
A)The public correctly predicts aggregate demand growth and inflation.
B)Actual unemployment exceeds the natural rate.
C)Cyclical unemployment rate is positive.
D)Unanticipated inflation is not zero.

Question

Quizplus · Accepted Answer

When the economy is in full-employment, there is no cyclical unemployment and the actual unemployment rate equals the natural rate. This makes it easier for the public to predict aggregate demand growth and inflation, which would result in a more accurate expectation of inflation (unlike option D).

Which of the Following Is True When the Economy Is