"Full employment" is said to exist when the unemployment rate equals
A) zero.
B) the cyclical unemployment rate.
C) the structural unemployment rate.
D) the natural unemployment rate.

Question

Quizplus · Accepted Answer

Full employment is said to exist when the unemployment rate equals the natural unemployment rate. The natural unemployment rate is the combination of frictional and structural unemployment and does not include cyclical unemployment, which is caused by fluctuations in the business cycle. A zero unemployment rate is not desirable as it would indicate a potential labor shortage and can create inflationary pressures.

"Full Employment" Is Said to Exist When the Unemployment Rate