The unemployment rate is equal to the natural unemployment rate at
A) some point within the interior of the physical PPF but beyond the institutional PPF.
B) some point within the interior of the physical PPF,but we cannot locate it with more accuracy.
C) some point within the interior of the institutional PPF,but we cannot locate it with more accuracy.
D) every point on the institutional PPF.
E) every point on the physical PPF.

Question

Quizplus · Accepted Answer

The natural unemployment rate is the rate of unemployment that exists even when the economy is at full employment. This means that it is the rate of unemployment that is caused by factors such as frictional unemployment and structural unemployment. The institutional PPF is the production possibilities frontier that takes into account the institutional factors that affect the economy, such as the minimum wage and the unemployment insurance system. The physical PPF is the production possibilities frontier that does not take into account these institutional factors.The unemployment rate is equal to the natural unemployment rate when the economy is at full employment. This means that the economy is producing at its potential output and there is no cyclical unemployment. When the economy is at full employment, the unemployment rate will be at the natural unemployment rate.

The Unemployment Rate Is Equal to the Natural Unemployment Rate