If current unemployment is close to the natural rate of unemployment, the level of the ________ GDP is likely to be close to the level of potential output.

Question

Quizplus · Accepted Answer

The natural rate of unemployment occurs when the economy is at full employment, which means that the labor market is in equilibrium and there is no cyclical unemployment. When unemployment is close to the natural rate, it indicates that the economy is operating at or near its potential output. Real GDP measures the total value of goods and services produced in an economy adjusted for inflation, and is therefore a good indicator of potential output. Therefore, if unemployment is close to the natural rate, the level of real GDP is likely to be close to the level of potential output.

If Current Unemployment Is Close to the Natural Rate of Unemployment