If the natural unemployment rate is 7 percent and the current unemployment rate is 5 percent,then the economy is
A) producing a level of Real GDP that is greater than the level of natural Real GDP.
B) in a recessionary gap.
C) producing a level of Real GDP that is less than the level of natural Real GDP.
D) a and b
E) b and c

Question

Quizplus · Accepted Answer

When the current unemployment rate is below the natural unemployment rate, it indicates that the economy is producing a level of Real GDP that is greater than the level of natural Real GDP, suggesting an expansionary gap rather than a recessionary gap.

If the Natural Unemployment Rate Is 7 Percent and the Current