The relationship between the size of the GDP gap and the unemployment rate is:
A)direct.
B)inverse.
C)undefined.
D)direct during recession, but inverse during expansion.

Question

Quizplus · Accepted Answer

The GDP gap is the difference between the actual GDP and the potential GDP. The unemployment rate is the percentage of the labor force that is unemployed. When the GDP gap is positive, the economy is producing more than its potential output and the unemployment rate is low. When the GDP gap is negative, the economy is producing less than its potential output and the unemployment rate is high.

The Relationship Between the Size of the GDP Gap and the Unemployment