The economy in the diagram below begins in long-run equilibrium at E₀. FIGURE 30-2
-Refer to Figure 30-2.At E₀,the unemployment rate is 5.6%.Therefore,1) the NAIRU is 5.6%; 2) cyclical unemployment is 5.6%;
3) the economy is at full unemployment.

Question

The economy in the diagram below begins in long-run equilibrium at E₀.

The economy in the diagram below begins in long-run equilibrium at E<sub>0</sub>. FIGURE 30-2 -Refer to Figure 30-2.At E<sub>0</sub>,the unemployment rate is 5.6%.Therefore,1) the NAIRU is 5.6%; 2) cyclical unemployment is 5.6%; 3) the economy is at full unemployment. A) 1 only B) 2 only C) 3 only D) 1 and 2 E) 1 and 3

FIGURE 30-2
-Refer to Figure 30-2.At E₀,the unemployment rate is 5.6%.Therefore,1) the NAIRU is 5.6%; 2) cyclical unemployment is 5.6%;
3) the economy is at full unemployment.

Quizplus · Accepted Answer

The NAIRU (Non-Accelerating Inflation Rate of Unemployment) is the unemployment rate at which inflation does not change, often considered the "natural" rate of unemployment. If the unemployment rate is 5.6% at E₀ and is considered the NAIRU, then the economy is at full employment, meaning there is no cyclical unemployment.

The Economy in the Diagram Below Begins in Long-Run Equilibrium