The economy is fully employed when there is no:

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BlackTom AI · Accepted Answer

To tackle the question, we first consider what 'fully employed' means in macroeconomic terms. It does not imply zero unemployment entirely, but rather that the only remaining unemployment is the natural rate, consisting of structural, frictional, and seasonal components. 
Option a: 'structural unemployment' is unemployment due to mismatches between workers' skills and jobs, or long-term industry changes. Even at full employment, some structural unemployment can persist, so this option does not describe a condition of being fully employed. 
Option b: 'frictional unemployment' arises from the normal turnover in the job market as people search for new positions. It is expected to exist even in healthy economies, so its presence does not violate the idea of full employment. 
Option c: 'seasonal unemployment' occurs due to regular seasonal patterns in certain industries (e.g., agriculture, tourism). This type can also persist independently of the business cycle, meaning it does not negate full employment. 
Option d: 'cyclical unemployment' is tied to the fluctuations of the business cycle. When the economy is at full employment, cyclical unemployment is absent, as there is no deficient demand pulling workers out of work. Therefore, this option correctly characterizes the condition of full employment, where only natural unemployment components remain.

Dashboard Term 2 Assessable Quiz 2 - Unemployment and AD/AS

The economy is fully employed when there is no:

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