When the unemployment rate is relatively high, we can conclude that:
A)the economy is in the expansion phase of the business cycle.
B)potential GDP is in excess of actual GDP.
C)actual GDP is in excess of potential GDP.
D)actual GDP is equal to potential GDP.

Question

Quizplus · Accepted Answer

When unemployment is relatively high, it means that there is a lack of demand for labor in the economy which indicates that the actual GDP is lower than the potential GDP. Hence, potential GDP is in excess of actual GDP.

When the Unemployment Rate Is Relatively High, We Can Conclude