Which of the following statements is INCORRECT?
A) The natural rate of unemployment is generally considered the equivalent of full employment.
B) The natural rate of unemployment consists of only frictional or structural unemployment.
C) The natural rate of unemployment is the level at which inflationary pressures in the economy are at their maximum.
D) The natural rate of unemployment is when cyclical unemployment is zero.

Question

Quizplus · Accepted Answer

The natural rate of unemployment is the level of unemployment that exists when the economy is producing at its potential output and there is no cyclical unemployment. It consists of frictional and structural unemployment, but not cyclical unemployment. The statement in option C is incorrect because the natural rate of unemployment is not related to inflationary pressures, but rather reflects the underlying level of unemployment in the economy.

Which of the Following Statements Is INCORRECT