As actual output falls below the potential level in the short run,which of the following is most likely to occur?
A)More resources will become unemployed.
B)The price level will increase.
C)Real GDP will increase.
D)Nominal GDP will remain constant.
E)The natural rate of unemployment will fall.

Question

Quizplus · Accepted Answer

When actual output falls below the potential level, it typically means that the economy is not utilizing its resources fully, leading to more resources, including labor, becoming unemployed. This is because the demand for goods and services is lower than what the economy can produce at full capacity, leading to a reduction in production and an increase in unemployment.

As Actual Output Falls Below the Potential Level in the Short