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An economy exactly at full employment has an unemployment rate that is:
AExactly equal to zero
BEqual to the natural rate
CWell above the natural rate
DWell below the natural rate
Answer & Solution
Correct answer: B. Equal to the natural rate
1. Full employment does not mean nobody is unemployed.
2. The natural rate is the unemployment that occurs even when the economy is healthy.
3. Below full employment the rate is greater than the natural rate.
4. At full employment there is no shortfall in either direction.
5. So the rate equals the natural rate rather than zero.
_Source: OpenStax Principles of Macroeconomics for AP Courses 2e (CC BY 4.0), Ch 7 'Unemployment'_
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