Suppose that you find that the labor market is out of equilibrium, in this case we...

Suppose that you find that the labor market is out of equilibrium, in this case we know that:

a. The economy is producing potential output

b. The economy may be in an expansion or recession

c. Prices can be lower than expected prices

d. The unemployment rate is composed of structural and frictional unemployment only

Expert Solution

Ans. b) the economy may be in expansion or recession.

When labor force is less than in an equilibrium, the economy is in a recession. When the labor force is more than in an equilibrium, the economy is experiencing an expansion.

Rahul Sunny answered 2 years ago

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