If Real GDP is less than Natural Real GDP,then the (actual)unemployment rate is
A) less than the natural unemployment rate.
B) equal to the natural unemployment rate.
C) greater than the natural unemployment rate.
D) less than or greater than the natural unemployment rate,but we cannot determine which one.
E) b and d

Question

Quizplus · Accepted Answer

If real GDP is less than natural real GDP, then it implies that there is a gap between actual and potential output which is referred to as the output gap. This indicates that firms are producing less than their potential and hence, are employing fewer workers than what they would have at the natural level of output. Therefore, the actual unemployment rate would be greater than the natural unemployment rate.

If Real GDP Is Less Than Natural Real GDP,then the (Actual)unemployment