ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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cyclical unemployment greater than the natural rate of unemployment
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unemployment equal to the natural rate of unemployment
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cyclical unemployment less than the natural rate of unemployment
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zero cyclical unemployment and unemployment less than the natural rate of unemployment
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Detailed explanation-1: -Lesson Summary When there is an inflationary gap, cyclical unemployment is in the negatives. This ebb and flow of the economy is called the business cycle. These different states of the economy are caused by changes in aggregate demand, which makes demand a key factor in the causation of cyclical unemployment.
Detailed explanation-2: -An economy with an inflationary gap would have very little unemployment and a higher rate of inflation. The Phillips curve suggested a smooth transition between the two. As expansionary policies were undertaken to move the economy out of a recessionary gap, unemployment would fall and inflation would rise.
Detailed explanation-3: -The cyclical unemployment rate is the difference between the natural unemployment rate (unemployment due to workers coming and going or searching for other work) and the current rate (the total amount of unemployed).
Detailed explanation-4: -When the unemployment rate is equal to its natural rate-that is, no cyclical unemployment exists-the output level produced in the economy is: at full-employment output.