Question
4. Use a properly labeled graph to illustrate the relationships between full-employment (or potential or natural rate of output) output and the boom-bust of business
4. Use a properly labeled graph to illustrate the relationships between full-employment (or potential or natural rate of output) outputand the boom-bust of business cycles. Explain how actual unemployment, frictional unemployment, structural unemployment, cyclical unemployment, natural unemployment, actual output, andare related to each other throughout a business cycle.Showyourstep-by-step derivationwithexplanation relatedto thegraph
My answer so far.
Business cycle
AD-AS graph
Point B (anything greater than Yn) is when the economy is booming and unemployment is less than the natural unemployment and cyclical unemployment is low and actual output is positive when demand is high
Point C is when the economy is at full employment and natural employment is equal to frictional unemployment + structural unemployment and cyclical unemployment is zero and actual output is 0
Point D (anything less than Yn) is when the economy is at a bust and unemployment is greater then the natural unemployment and cyclical employment is high. Actual output is negative when demand is low
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