If the output gap equals $50 million,then

Question

Quizplus · Accepted Answer

An output gap of $50 million indicates that actual GDP is below potential GDP. Therefore, there is an expansionary gap (also known as a positive output gap). This suggests that the economy is operating below its potential level of output and resources are not fully utilized. Cyclical unemployment is present in an expansionary gap as employment is below its natural rate. Structural and frictional unemployment occur in both expansionary gaps and recessionary gaps, but they do not necessarily equal cyclical unemployment.

If the Output Gap Equals $50 Million,then