ECONOMICS
BUSINESS CYCLES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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at full employment
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on the cusp of a recession
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entering into inflation
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at an unnatural rate
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Detailed explanation-1: -BLS defines full employment as an economy in which the unemployment rate equals the nonaccelerating inflation rate of unemployment (NAIRU), no cyclical unemployment exists, and GDP is at its potential.
Detailed explanation-2: -An unemployment rate of 5% is often considered full employment. This level of unemployment is enough to minimize inflation and allow workers to move between jobs, but those wanting full-time work should be able to find a full-time job (even if it is not their preferred occupation).
Detailed explanation-3: -Economists assume that about 5% (probably less now) is Full Employment. This is called the “full employment rate of unemployment", or the “natural rate of unemployment” and it includes the frictional unemployment and the structural unemployment, but no cyclical unemployment.
Detailed explanation-4: -What most neoclassical economists mean by “full” employment is a rate somewhat less than 100% employment. Others, such as the late James Tobin, have been accused of disagreeing, considering full employment as 0% unemployment.