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,

The unemployment rate is equal to the natural rate of unemployment.
The cyclical rate of unemployment is zero.

False :-

The natural rate of unemployment is equal to zero.
The unemployment rate is equal to zero.
The unemployment rate is equal to the cyclical rate of unemployment.
The employment rate is 100%.

Rahul Sunny answered 1 year ago

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