The aggregate cost of unemployment can be measured by the
A) amount by which actual GDP exceeds potential GDP.
B) amount by which potential GDP exceeds actual GDP.
C) excess of real GDP over nominal GDP.
D) excess of nominal GDP over real GDP.

Question

Quizplus · Accepted Answer

The amount by which potential GDP exceeds actual GDP represents the lost output and income due to unemployment, as potential GDP is the level of output that could be produced if all resources were fully employed. Therefore, measuring the gap between actual and potential GDP provides an estimate of the aggregate cost of unemployment. Choices A, C, and D are incorrect as they do not measure the cost of unemployment.

The Aggregate Cost of Unemployment Can Be Measured by the