Maxie Formal1) A) Why do economists refer to the economy as "fully employed" even when there is measured unemployment as high as 4.5% -5% ? (Hint: begin your answer with a definition of full employment and then compare with the concept of natural rate of unemployment, NAIRU; what is it and why?). How do you relate the most recent unemployment rate (Look Dec, 2011 data on unemployment rate published on Jan 6, 2012 in ) to your conclusion of this question indicating if the US economy is in a state of full employment?
B) Why would you expect the inflation rate to accelerateif the actual unemployment rate declined to a level lowerthan the "full employment" unemployment rate (NAIRU)? Explain your answer in a few sentences. What state of business cycles (such as recession, trough, recovery or boom) does the current US economy face, and why?