The Full-Employment Rate of Output Can

question 64

Multiple Choice

The full-employment rate of output can

• A) be surpassed in the long run only if input prices are flexible.
• B) not be surpassed in either the short run or the long run.
• C) be surpassed only when firms are not yet producing at full capacity.
• D) be surpassed only in the short run.

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Definitions:

Natural Rate

A concept in economics referring to the level of unemployment at which there is no cyclical or deficient-demand unemployment. It represents a balance between the supply of labor and job vacancies, considering that some frictional and structural unemployment is inevitable.

Unemployment

The situation in which individuals who are capable of working and are seeking employment are unable to find work.

Expected Inflation

The rate at which prices of goods and services are anticipated to rise over time, as forecasted by consumers, businesses, and economists.

Actual Inflation

The rate at which the general level of prices for goods and services is rising, and subsequently, eroding purchasing power.