Question

Refer to exhibit 9-7. which point is representative of the economy with an unemployment rate that is greater than the natural unemployment rate?

Answer 1

Point A

Step-by-step explanation:

According to exhibit 9-7, the point where the unemployment rate is higher than the natural unemployment rate is A.

The natural unemployment rate includes only frictional and structural unemployment and generally the economy is growing, that is why some people refer to it as full employment.

When unemployment rate is above natural unemployment is because there is cyclical unemployment which occurs when the economy is contracting or at a recession. This means that the economy is not producing at potential output. Point A is the only point that is not located at potential output.