The current rate of unemployment in Burrland is 3\%. Economists estimate that frictional unemployment is $5 \%$ and structural unemployment is $2 \%$.

Which of the following best describes the amount of cyclical unemployment in Burrland and current output in the economy?

Choose 1 answer:
(A) Cyclical unemployment is $0 \%$; output is equal to full employment output.
(B) Cyclical unemployment is $-4 \%$; output is greater than full employment output.
(C) Cyclical unemployment is $0 \%$, output is less than full employment output.
(D) Cyclical unemployment is $-4 \%$; output is less than full employment output.
(E) Cyclical unemployment is $7 \%$; output is equal to full employment output.

Question

The current rate of unemployment in Burrland is 3\%. Economists estimate that frictional unemployment is $5 \%$ and structural unemployment is $2 \%$.

Which of the following best describes the amount of cyclical unemployment in Burrland and current output in the economy?

Choose 1 answer:
(A) Cyclical unemployment is $0 \%$; output is equal to full employment output.
(B) Cyclical unemployment is $-4 \%$; output is greater than full employment output.
(C) Cyclical unemployment is $0 \%$, output is less than full employment output.
(D) Cyclical unemployment is $-4 \%$; output is less than full employment output.
(E) Cyclical unemployment is $7 \%$; output is equal to full employment output.

Accepted Answer

∻Solution by Steps∻ ‖ step 1 ⋮ Calculate the total expected unemployment by adding frictional and structural unemployment: $5\% + 2\% = 7\%$. ‖ ‖ step 2 ⋮ Compare the actual unemployment rate to the expected unemployment rate to find cyclical unemployment: $3\% - 7\% = -4\%$. ‖ ‖ step 3 ⋮ Interpret the negative cyclical unemployment: If cyclical unemployment is negative, this indicates that the actual unemployment is less than the natural rate of unemployment, suggesting that the economy is producing above its full employment output. ‖ ∻Answer∻ ***B*** ∻Key Concept∻ ⚹Cyclical Unemployment⚹ ∻Explanation∻ ⚹Cyclical unemployment is the difference between the actual unemployment rate and the natural rate of unemployment (the sum of frictional and structural unemployment). A negative cyclical unemployment indicates an economy operating above its full employment output.⚹◊What is the formula for calculating the unemployment rate in Burrland⍭ Generate me a similar question◊

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