The rate of unemployment when the economy is at full employment is:
A) zero.
B) the natural rate.
C) the structural rate.
D) less than the full employment rate of unemployment.

Question

Quizplus · Accepted Answer

The rate of unemployment when the economy is at full employment is the natural rate of unemployment, which includes frictional and structural unemployment. It is not zero because there will always be some level of unemployment due to people searching for better jobs or employers seeking better workers. It is not the structural rate because that refers to the portion of the natural rate of unemployment that is due to job mismatches and skills gaps. It is also not less than the full employment rate of unemployment because that would imply negative unemployment, which is impossible.

The Rate of Unemployment When the Economy Is at Full