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When the economy is at its full employment level, is the unemployment rate zero? Justify your...

When the economy is at its full employment level, is the unemployment rate zero? Justify your answer

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Answer #1
  • No, when there is full employment within the economy, it just means that the economy is operating at full potential and it is producing an output equal to the potential output.
  • It does not mean that, the unemployment rate is a perfect zero when there is full employment.
  • This is because, when the economy is facing full employment it is experiencing a natural rate of unemployment.
  • That is, there is still some amount of frictional and structural unemployment present within the economy even when all the output is fully employed.
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