When all unemployment is due to _________ and _________ factors, we say that the economy is at full employment. This means there will always be some unemployment in the economy.

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The question asks us to identify the pair of unemployment types that, when responsible for all unemployment, still corresponds to the economy being at full employment.
Option 1: 'cyclical / seasonal'—Cyclical unemployment arises from the business cycle, and seasonal unemployment comes from regular seasonal patterns. If all unemployment were due to these two, it would imply the economy is operating below potential at times or with seasonal shifts, not at full employment. So this pairing does not fit the full-employment concept.
Option 2: 'frictional / structural'—Frictional unemployment reflects the normal and often brief job-search period as people transition between jobs, while structural unemployment arises from mismatches between skills and job requirements or from long-term changes in the economy. The standard notion of full employment allows for these natural forms of unemployment, meaning there will always be some unemployment even when the economy is at full capacity. This pairing aligns with that concept.
Option 3: 'cyclical / structural'—Inclusion of cyclical unemployment would imply unemployment due to downturns in the business cycle. At full employment, cyclical unemployment is typically absent or zero, so this combination does not describe full employment.
Option 4: 'frictional / cyclical'—Here, frictional unemployment is a natural part of job searching, but the inclusion of cyclical unemployment would indicate downturn-related job losses. Full employment generally assumes minimal or no cyclical unemployment, so this pairing is not consistent with the standard definition.
Note: Each option presents a different mix of unemployment sources. The core idea of full employment accepts frictional and structural components as the unavoidable, 'natural' portion of unemployment, while cyclical unemployment is the deviation from full employment arising from the business cycle.

ECON 2002.01 AU2025 (21333) Midterm Exam 2- Requires Respondus LockDown Browser

When all unemployment is due to _ and _ factors, we say that the economy is at full employment. This means there will always be some unemployment in the economy.

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