Unemployment is higher than the natural rate when:
A) nominal GDP is higher than expected.
B) nominal GDP is lower than expected.
C) unexpected nominal GDP is zero.
D) output is at a high level.

Question

Quizplus · Accepted Answer

When nominal GDP is lower than expected, it typically indicates that the economy is underperforming, leading to higher unemployment rates than the natural rate. This is because lower GDP reflects lower economic activity and demand, which can result in job losses.

Unemployment Is Higher Than the Natural Rate When