If short-run output is less than the potential output, then:
A) the unemployment rate in the economy is zero.
B) frictional unemployment is less than its natural rate.
C) frictional unemployment is greater than its natural rate.
D) structural unemployment is greater than frictional unemployment.

Question

Quizplus · Accepted Answer

When short-run output is less than potential output, it typically means that not all resources (including labor) are being fully utilized. This situation often corresponds with higher unemployment rates, including frictional unemployment being greater than its natural rate, as the labor market is not at full equilibrium.

If Short-Run Output Is Less Than the Potential Output, Then