Discussion
If 1 = Involuntary unemployment; 2 = Disguised unemployment; 3 = Frictional unemployment; and 4 = Structural unemployment, then full employment is consistent with
Answer: C
Full employment does not mean zero unemployment: it is the level at which there is no involuntary unemployment, but frictional and structural unemployment, which come from the movement of workers between jobs and from changes in the structure of the economy, still exist. So full employment is consistent with frictional and structural unemployment, 3 and 4, option (C). Involuntary unemployment (1) is excluded by definition, and disguised unemployment (2) is a sign of underemployment in a poor economy and not of full employment.
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