The structural unemployment rate is 1.5 percent,the frictional unemployment rate is 3.1 percent,and the economy's current unemployment rate is 6.9 percent.The economy is in
A) a recessionary gap producing less than Natural Real GDP.
B) an inflationary gap producing more than Natural Real GDP.
C) long-run equilibrium.
D) an inflationary gap producing Natural Real GDP.
E) a recessionary gap producing more than Natural Real GDP.

Question

Quizplus · Accepted Answer

The economy is in a recessionary gap because the current unemployment rate (6.9%) is higher than the sum of the structural (1.5%) and frictional (3.1%) unemployment rates, indicating it is producing less than its Natural Real GDP.

The Structural Unemployment Rate Is 1