Question

In: Economics

Which of the following is true when the economy is at full employment?

Which of the following is true when the economy is at full employment? 

  •  The unemployment rate is equal to the natural rate of unemployment.

  •  The unemployment rate is equal to the cyclical rate of unemployment.

  •  The cyclical rate of unemployment is zero

  •  The unemployment rate is equal to zero

  •  The employment rate is 100% 

  • The natural unemployment rate is equal to zero

Solutions

Expert Solution

  • When the Economy is at full employment it means that all the available resources are being used efficiently.
  • It does not mean zero unemployment, but rather it means than majority of the unemployment is eliminated and it is somewhat less than 100%.
  • The unemployment rate equals natural rate when an Economy is at full employment, which consists of both structural and frictional unemployment when the Market is in equilibrium.
  • The following statements that are true or false regarding full employment can be classified as :-

True :-

  • When the economy is at full employment,
  1. The unemployment rate is equal to the natural rate of unemployment.
  2. The cyclical rate of unemployment is zero.

False :-

  1. The natural rate of unemployment is equal to zero.
  2. The unemployment rate is equal to zero.
  3. The unemployment rate is equal to the cyclical rate of unemployment.
  4. The employment rate is 100%.

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

Which of the following is most likely to restore an economy to full employment, if it...
Which of the following is most likely to restore an economy to full employment, if it is operating below full employment due to a decrease in net exports? Select one: a. Devaluation of the domestic currency b. None of these c. A decrease in investment in the economy d. A decrease in the demand for goods and services in the economy e. An increase in the interest rate
An increase in taxes when the economy is above full employment ​ ______ aggregate demand and...
An increase in taxes when the economy is above full employment ​ ______ aggregate demand and real​ GDP, and the price level​ ______. A. does not​ change; does not change B. ​decreases; falls C. ​increases; falls D. ​increases; rises The magnitude of the tax multiplier is equal to​ _______. A. the government expenditure multiplier divided by MPC B. MPC times the government expenditure multiplier C. the government expenditure multiplier D. MPC
4. When an economy is already at full employment, what is the outcome of expansionary fiscal...
4. When an economy is already at full employment, what is the outcome of expansionary fiscal policies to employment, inflation, real output, and deficits (assuming no changes in tax rates)? 5. Explain the effects of the following actions on equilibrium income, assuming that the marginal propensity to consume is 0.8 Government purchases rise by $40 billion. Taxes fall by $40 billion.
When an economy is already at full employment, what is the outcome of expansionary fiscal policies...
When an economy is already at full employment, what is the outcome of expansionary fiscal policies to employment, inflation, real output, and deficits (assuming no changes in tax rates)?
When the economy is at its full employment level, is the unemployment rate zero? Justify your...
When the economy is at its full employment level, is the unemployment rate zero? Justify your answer.
5. The U.S. economy is at full employment when strong economic growth in Asia increases the...
5. The U.S. economy is at full employment when strong economic growth in Asia increases the demand for​ U.S.-produced goods and services. The Fed​ ______ face a tradeoff in the short run because​ ______. A. does​ not; it will move both real GDP and the price level back to their desired levels B. does​ not; it is impossible to decrease real GDP and the price level simultaneously C. ​does; it must increase real GDP and decrease the price level simultaneously...
Consider an economy that is currently at full employment (at potential GDP). illustrate this economy in...
Consider an economy that is currently at full employment (at potential GDP). illustrate this economy in an AD-AS model. suppose that there is increased security about jobs and future income. a. use your graph to show and explain what will happen to the price level GDP and unemployment according to the keynesian model. b. use your graph to show and explain what will happen to the price level GDP and unemployment according to the neo classical model.
Suppose, initially the Australian economy is at full employment (in other words the economy is at...
Suppose, initially the Australian economy is at full employment (in other words the economy is at the potential GDP). Using AD-AS model, explain how would each of the following events affect the economy both in the immediate and in the long term. a) A slowdown in China’s economic growth due to the sub-prime crisis in the US. (3.5 marks) b) Union wage settlements push the wage rate up. c) An increase in consumer confidence. (3.5 marks)
Suppose, initially the Australian economy is at full employment (in other words the economy is at...
Suppose, initially the Australian economy is at full employment (in other words the economy is at the potential GDP). Using AD-AS model, explain how would each of the following events affect the economy both in the immediate and in the long term. a) A slowdown in China’s economic growth due to the sub-prime crisis in the US. b) Union wage settlements push the wage rate up. c) An increase in consumer confidence.
Suppose, initially the Australian economy is at full employment (in other words the economy is at...
Suppose, initially the Australian economy is at full employment (in other words the economy is at the potential GDP). Using AD-AS model, explain how would each of the following events affect the economy both in the immediate and in the long term. a) A slowdown in China’s economic growth due to the sub-prime crisis in the US. b) Union wage settlements push the wage rate up. c) An increase in consumer confidence.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT