Suppose the Natural Rate of Unemployment Is 6 Percent

question 78

Multiple Choice

Suppose the natural rate of unemployment is 6 percent. What is the actual rate of unemployment if actual output is 2 percent below potential output?

• A)4 percent
• B)7 percent
• C)8 percent
• D)10 percent

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Definitions:

Public Good

A product that one individual can consume without reducing its availability to another individual and from which no one is excluded.

National Defense

The government functions and mechanisms aimed at protecting a country against external aggression, threats, and maintaining sovereignty.

Free Market

An economic system where prices are determined by unrestricted competition between privately owned businesses, without excessive government control or intervention.

Externality

A consequence of an economic activity experienced by unrelated third parties; it can be either positive (beneficial) or negative (harmful).