ECONOMICS
BUSINESS CYCLES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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An economy is at full employment when the unemployment rate is 0%
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An economy can never been at full employment since there are always leakages like taxes, savings, and imports
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Full employment occurs when cyclical unemployment is zero
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Full employment occurs when there is only frictional unemploymen
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Full employment is shown as a rightward shift in the production possibilities curve.
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Detailed explanation-1: -In the United States, the Bureau of Labor Statistics considers full employment to be happening when the unemployment rate is equal to the NAIRU, there is no cyclical unemployment, and the country’s GDP is at its potential.
Detailed explanation-2: -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-3: -Full employment does not mean zero unemployment, it means cyclical unemployment rate is zero. At this rate, job seekers are equal to job openings. This is also called the natural rate of unemployment (Un) where real GDP is at its potential GDP.
Detailed explanation-4: -Only the cyclical unemployment rate is zero percent during full employment.
Detailed explanation-5: -Not according to economists. Full employment is not the same as zero unemployment because there are different types of unemployment, and some are unavoidable or even necessary for a functioning labor market.