alleryStart learning →When the economy is below full employment, the unemployment rate is:
AExactly equal to zero
BAbove the natural rate
CBelow the natural rate
DEqual to the natural rate
Answer & Solution
Correct answer: B. Above the natural rate
1. Full employment is defined against the natural rate.
2. The natural rate is the unemployment present in a healthy economy.
3. When the economy is below full employment the rate is greater than the natural rate.
4. Real GDP is then less than potential GDP.
_Source: OpenStax Principles of Macroeconomics for AP Courses 2e (CC BY 4.0), Ch 7 'Unemployment'_
Keep practising Unemployment
Browse all Unemployment questions for AP Macroeconomics, or explore more Economics topics.