The higher the rate of unemployment,
A) the larger is the GDP gap.
B) the smaller is the GDP gap.
C) the higher is the level of actual GDP.
D) the lower is the level of potential GDP.

Question

Quizplus · Accepted Answer

The GDP gap represents the difference between actual GDP and potential GDP. A higher rate of unemployment indicates that fewer people are working, which means that the economy is not producing at its full capacity, thus increasing the GDP gap.

The Higher the Rate of Unemployment