An unemployment rate that is above the natural rate indicates ________ unemployment,and we say that the economy is producing ________ the full employment output level.
A) cyclical; at more than
B) cyclical; at
C) cyclical; at less than
D) frictional; at more than
E) frictional; at

Question

Quizplus · Accepted Answer

A high unemployment rate above the natural rate suggests cyclical unemployment, which is due to a lack of demand in the economy. At the same time, the economy is producing less than the full employment output level, as there are unemployed resources (labor, capital, etc.) that could be utilized to produce more goods and services.

An Unemployment Rate That Is Above the Natural Rate Indicates