The unemployment gap
A)always grows twice as fast as the output gap
B)always is negative
C)always increases as the rate of inflation increases
D)always stays at its natural level
E)none of the above

Question

Quizplus · Accepted Answer

None of the statements given in the options are necessarily true. The unemployment gap and the output gap can grow at different rates depending on various economic factors, and can even have opposite trends in certain situations. The unemployment gap can be either negative or positive. The relationship between the unemployment gap and the rate of inflation is not always straightforward and can vary across different macroeconomic contexts. The unemployment gap can also deviate from its natural level due to various shocks or policy interventions. Therefore, the correct answer is E.

The Unemployment Gap