If the natural unemployment rate is 5.5 percent,then the economy is in an inflationary gap when the actual unemployment rate is
A) greater than 5.5 percent.
B) less than 5.5 percent.
C) 0 percent.
D) 5.5 percent.

Question

Quizplus · Accepted Answer

When the actual unemployment rate is less than the natural unemployment rate, it indicates that the economy is operating above its potential output level, leading to an inflationary gap. This is because more people are employed than what is considered sustainable in the long run, putting upward pressure on wages and prices.

If the Natural Unemployment Rate Is 5