In long-run equilibrium, employment is at full employment and unemployment is at the natural rate of unemployment.

Question

Quizplus · Accepted Answer

In the long run, the economy will reach its potential output and full employment. The natural rate of unemployment refers to the level of unemployment that exists when the labor market is in equilibrium and there is no cyclical unemployment. Therefore, in long-run equilibrium, the economy will be at full employment (no cyclical unemployment) and unemployment will be at its natural rate.

In Long-Run Equilibrium, Employment Is at Full Employment and Unemployment