If the actual GDP is less than potential GDP:
A)potential GDP will fall.
B)the price level will rise.
C)investment spending will fall.
D)the actual unemployment rate will be higher than the natural unemployment rate.

Question

Quizplus · Accepted Answer

If the actual GDP is less than potential GDP, it means that there is a recessionary gap, which implies that there are unused resources and that the actual unemployment rate is higher than the natural unemployment rate. This is because businesses are not producing at their full potential, which leads to layoffs and higher unemployment. However, this situation does not necessarily lead to a fall in potential GDP, a rise in the price level, or a fall in investment spending.

If the Actual GDP Is Less Than Potential GDP