If the economy is on its short-run Phillips curve at the natural unemployment rate then, in the AS-AD model, real GDP is definitely
A) equal to potential GDP.
B) greater than potential GDP.
C) less than potential GDP.
D) increasing.
E) decreasing.

Question

Quizplus · Accepted Answer

When the economy is on its short-run Phillips curve at the natural unemployment rate, it implies that the economy is operating at its full capacity, which means real GDP is equal to potential GDP.

If the Economy Is on Its Short-Run Phillips Curve at the Natural