Which of the following is true of an economy at full employment?
A)There is no job turnover in the economy.
B)The unemployment rate in the economy is equal to the natural rate of unemployment.
C)The economy's labor and capital are not fully utilized.
D)An increase in price level increases the full-employment level of output.

Question

Quizplus · Accepted Answer

Full employment means that all those who are willing and able to work have jobs. At this level, the unemployment rate is equal to the natural rate of unemployment, which is the minimum level of unemployment that is consistent with the economy's potential output. Therefore, option B is correct. Option A is not correct because there can still be job turnover, as people leave one job to take another. Option C is not correct because at full employment, all resources, including labor and capital, are fully utilized. Option D is not correct because an increase in the price level does not impact the full-employment level of output, which is determined by the economy's productive capacity.

Which of the Following Is True of an Economy at Full