Suppose that the unemployment rate equals 4.5 percent and that the natural unemployment rate is 5.5 percent. We can conclude that

Question

Quizplus · Accepted Answer

When the actual unemployment rate is lower than the natural unemployment rate, it suggests that the economy is operating above its long-term sustainable level of output, indicating a positive output gap. This means that the demand for goods and services is higher than what the economy can produce at its natural rate, leading to lower unemployment rates than the natural rate.

Suppose That the Unemployment Rate Equals 4