Suppose that actual aggregate output is equal to the potential output; the actual unemployment rate is:
A) equal to the natural rate of unemployment.
B) higher than the natural rate of unemployment.
C) zero.
D) equal to the cyclical rate of unemployment.

Question

Quizplus · Accepted Answer

If actual aggregate output is equal to potential output, there is no cyclical unemployment (which is the deviation from the natural rate of unemployment due to business cycle fluctuations). Therefore, the actual unemployment rate would be equal to the natural rate of unemployment.

Suppose That Actual Aggregate Output Is Equal to the Potential