When the rate of unemployment is equal to the sum of seasonal, frictional and structural unemployment rates then:
A) the natural rate of unemployment must also be zero.
B) the rate of frictional unemployment must be negative.
C) the economy must have entered a recessionary stage.
D) the economy is considered to be at full employment.

Question

Quizplus · Accepted Answer

When the rate of unemployment is equal to the sum of seasonal, frictional, and structural unemployment rates, the economy is considered to be at full employment. This means that there is still some level of unemployment due to these factors, but there is no cyclical or demand-deficient unemployment. Therefore, the economy is operating at its potential output level.

When the Rate of Unemployment Is Equal to the Sum