The relationship between the size of the negative GDP gap and the unemployment rate is
A)direct.
B)inverse.
C)undefined.
D)direct during recession but inverse during expansion.

Question

Quizplus · Accepted Answer

The negative GDP gap is the difference between the actual GDP and the potential GDP. When the negative GDP gap is large, it means that the economy is producing significantly below its potential. This leads to high unemployment, as businesses are not able to hire as many workers as they would if the economy were operating at its potential.

The Relationship Between the Size of the Negative GDP Gap