Which of the following is not true?
A)At the natural rate of unemployment, the economy is considered to be at full employment.
B)At full employment, the economy produces its potential output.
C)If the unemployment rate in an economy is greater than its natural rate, the economy produces an output level that is less than its potential output.
D)If the unemployment rate in an economy is less than its natural rate, the economy experiences cyclical unemployment.
E)The natural rate of unemployment increases when there is an increase in frictional unemployment.

Question

Quizplus · Accepted Answer

Cyclical unemployment occurs when the economy is not at full employment, which typically means the unemployment rate is above the natural rate, not below it. When the unemployment rate is below the natural rate, the economy is often considered to be overheating, leading to inflationary pressures, not cyclical unemployment.

Which of the Following Is Not True