If the Natural Rate of Unemployment Equals 5 Percent and the Actual

question 73

Multiple Choice

If the natural rate of unemployment equals 5 percent and the actual rate of unemployment equals 6 percent, then cyclical unemployment equals:

• A)11 percent.
• B)1.2 percent.
• C)1 percent.
• D)−1 percent.

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Definitions:

Excess Capacity

A situation in which a company can produce more goods or services than currently demanded, due to underused resources.

Economic Profit

Profit calculated by subtracting both explicit and implicit costs from total revenues, indicating the efficiency beyond the breakeven point.

Capital-Intensive

Describing industries or processes that require a high level of capital investment in machinery and equipment relative to labor.

Labor-Intensive

A process or industry that requires a high input of labor relative to capital in the production of goods or services.