When the economy produces its potential output,_____ is zero.
A)frictional unemployment
B)cyclical unemployment
C)seasonal unemployment
D)structural unemployment
E)disguised unemployment

Question

Quizplus · Accepted Answer

Cyclical unemployment is the unemployment that occurs due to fluctuations in the business cycle. When the economy produces its potential output, there is no excess demand or supply of goods and services, and hence, there is no cyclical unemployment. However, the other forms of unemployment such as frictional, seasonal, and structural unemployment may still exist. Disguised unemployment is not applicable here as it pertains to a different type of economy where there is no visible unemployment, but underemployment is prevalent.

When the Economy Produces Its Potential Output,_____ Is Zero