When the unemployment rate ________ the natural unemployment rate,real GDP ________ potential GDP.

Question

Quizplus · Accepted Answer

When the unemployment rate is greater than the natural unemployment rate, it indicates that there is a shortfall in the demand for labor, which in turn implies that the actual level of output (real GDP) is less than the potential output (potential GDP) that the economy can produce at full employment. Therefore, the correct option is B, where the real GDP is less than potential GDP when the unemployment rate is greater than the natural rate.

When the Unemployment Rate ________ the Natural Unemployment Rate,real GDP