Suppose the unemployment rate is ________ the natural rate. We would expect to see GDP ________ potential output, falling wages, and falling prices.
A) above; below
B) above; above
C) below; below
D) below; above

Question

Quizplus · Accepted Answer

When the unemployment rate is above the natural rate, it indicates an economy in a recessionary period. In this scenario, GDP is expected to be below potential output, and because of the surplus of labor, wages will fall, causing a decrease in prices.

Suppose the Unemployment Rate Is ________ the Natural Rate