Asked by Cashmere Wilson on Jun 09, 2024
Verified
Cyclical unemployment in an economy will be zero when:
A) there is an expansionary gap in the economy.
B) the economy is producing its natural rate of output.
C) there is a recessionary gap in the economy.
D) the actual price level is equal to the expected price level in the economy.
E) the actual price level exceeds the expected price level in the economy.
Cyclical Unemployment
Unemployment that rises during economic downturns and falls when the economy improves, directly related to cycles of economic upturn and downturn.
Natural Rate
The long-term unemployment rate around which the labor market is considered to be in balance, where the number of people seeking jobs equals the number of jobs available.
Expansionary Gap
A situation in macroeconomics where the real GDP is higher than the potential GDP, leading to inflationary pressures.
- Determine the categories of unemployment that occur when an economy operates at its maximum output capacity.
- Examine how alterations in salary and price levels impact the possible output.
Verified Answer
BW
Britoni WilliamsJun 15, 2024
Final Answer :
B
Explanation :
Cyclical unemployment occurs when there is a deviation from the natural rate of unemployment due to business cycle fluctuations. When the economy is producing its natural rate of output, there is no cyclical unemployment because there is no output gap.
Learning Objectives
- Determine the categories of unemployment that occur when an economy operates at its maximum output capacity.
- Examine how alterations in salary and price levels impact the possible output.