Question

Which of the following are true of an economy operating below full employment? Check all that apply. Actual real GDP is less than potential real GDP. The economy is in the peak phase of the business cycle. A worker with a college degree is more likely to be unemployed than a worker without one. The economy has an unemployment rate higher than the natural rate of unemployment.

Answer 1

Answer:

The economy has an unemployment rate higher than the natural rate of unemployment.

Explanation:

Full Employment is when all workers able & willing to work, are employed.

Unemployment is when a person able & willing to do a work , doesn't get work.

However, there is certain 'natural' level of unemployment normalised during efficient running of economy. It involves frictional & structural unemployment. Frictional unemployment is temporary unemployment of people shifting their jobs and Structural unemployment is temporary unemployment due to industrial reorganisation (eg : technological change).

So, Economy being below Full Employment implies that economy has unemployment level above natural rate of unemployment.