When an economy is producing at its potential level of output:
A)cyclical unemployment is not occurring.
B)structural unemployment is not occurring.
C)frictional unemployment is not occurring.
D)No unemployment may occur when the economy is at its potential output.

Question

Quizplus · Accepted Answer

When an economy is producing at its potential level of output, cyclical unemployment is not occurring because the economy is operating at full capacity, meaning all resources are being used efficiently. However, structural and frictional unemployment may still exist as they are part of the natural rate of unemployment.

When an Economy Is Producing at Its Potential Level of Output