When the economy is in long-run equilibrium at potential output but with unemployment, there is no spare _________ and all remaining unemployment is __________.

Question

Quizplus · Accepted Answer

When the economy is in long-run equilibrium at potential output but with unemployment, there is no spare capacity, and all remaining unemployment is considered voluntary. This is because at potential output, the economy is producing at its full capacity, and any unemployment is not due to a lack of jobs but rather to individuals choosing not to work at the prevailing wage rates or taking time to find better job matches.

When the Economy Is in Long-Run Equilibrium at Potential Output