A decrease in a recessionary GDP gap will most likely be associated with a decrease in
A)Structural unemployment.
B)Cyclical unemployment.
C)The price level.
D)Frictional unemployment.

Question

Quizplus · Accepted Answer

A recessionary GDP gap occurs when actual GDP is lower than potential GDP, which indicates that there is an output gap and firms are producing less than they are capable of. This leads to a decrease in demand for labor and results in higher unemployment rates, which is known as cyclical unemployment. Therefore, a decrease in a recessionary GDP gap will most likely be associated with a decrease in cyclical unemployment.

A Decrease in a Recessionary GDP Gap Will Most Likely