If cyclical unemployment is eliminated in the economy, then
A)the economy is considered to be at full employment.
B)the unemployment rate is below the natural rate of unemployment.
C)the unemployment rate is above the natural rate of unemployment.
D)the economy is at less than full employment.
E)the unemployment rate will be zero.

Question

Quizplus · Accepted Answer

Cyclical unemployment refers to the temporary unemployment caused by fluctuations in the business cycle, where firms reduce production and lay off workers during recessions. If cyclical unemployment is eliminated, it means that all workers who are willing and able to work have jobs. This implies that the economy is operating at its full employment level, where the unemployment rate is equal to the natural rate of unemployment, which includes frictional and structural unemployment. Therefore, the correct choice is A.

If Cyclical Unemployment Is Eliminated in the Economy, Then