If the unemployment rate is 4.5 percent and the natural unemployment rate is 5.5 percent, then
A)potential GDP equals real GDP.
B)real GDP is greater than nominal GDP.
C)potential GDP is greater than real GDP.
D)we have mismeasured the natural unemployment rate.
E)potential GDP is less than real GDP.

Question

Quizplus · Accepted Answer

The unemployment rate being below the natural unemployment rate suggests that the economy is currently operating above potential, meaning that actual output (real GDP) is greater than potential output (potential GDP).

If the Unemployment Rate Is 4