A large negative GDP gap implies
A) an excess of imports over exports.
B) a low rate of unemployment.
C) a high rate of unemployment.
D) a sharply rising price level.

Question

Quizplus · Accepted Answer

A large negative GDP gap implies that the actual level of output is significantly lower than the potential level of output (as determined by the trend in past growth rates). This means that there is a significant amount of unused resources, including labor. Therefore, a high rate of unemployment is the best choice.

A Large Negative GDP Gap Implies