As the unemployment rate rises,
A)real GDP also rises.
B)nominal GDP rises.
C)the employment rate rises.
D)lost national output rises.

Question

Quizplus · Accepted Answer

When unemployment rate rises, it means there are more people who are out of work and not producing output. This leads to a decrease in the total output of the economy, known as the lost national output. Therefore, D is the best choice. A is incorrect because when there are more unemployed people, the real GDP is likely to decrease, not increase. B is incorrect because nominal GDP includes the effect of inflation and does not directly reflect unemployment rates. C is incorrect because the employment rate is the opposite of the unemployment rate and would decrease as the unemployment rate rises.

As the Unemployment Rate Rises