An aggregate output level lower than potential output means there will be:
A) high interest rates.
B) high inflation.
C) low unemployment.
D) high unemployment.

Question

Quizplus · Accepted Answer

A lower aggregate output level than potential output implies that the economy is producing less than it is capable of, indicating a situation of underutilization of resources, including labor, leading to a higher unemployment rate.

An Aggregate Output Level Lower Than Potential Output Means There