The natural unemployment rate is the fraction of the labor force that is unemplo

Question

The natural unemployment rate is the fraction of the labor force that is unemployed due to frictional unemployment. True False Our SHORT-RUN aggregate supply curve is horizontal to indicate___. output demanded is assumed to increase with price in the short-run nothing since the curve is actually vertical firms are assumed to be able to sell as much as buyers demand at the existing price level in the short-run an increase in price results in no increase in output supplied in the short- run price is assumed to change only when demand changes in the short-run

Explanation / Answer

Q7,) FALSE

The natural rate of unemployment is equal to the amount of frictional unemployment plus structural unemployment.

Q8.)C. firms are assumed to able to sell as much as buyers demand at the existing price level in the short-run.

Because there is some unemployment in the economy, firm can hire as much labor as they want at the current wage. Without increase in input costs as output expands, firms can supply any amount of output at the going price, The wage does not fall even though there is excess demand, since the Keynesian model assumes that wages are sticky downward. Price is also assumed to be sticky.

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