Unemployment will decrease over time if:
A) actual GDP increases faster than potential GDP.
B) actual GDP increases at the same rate as potential GDP.
C) acutal GDP remains the same but potential GDP increases.
D) actual GDP increases at a less than proportionate rate than potential GDP.
E) actual GDP decreases but potential GDP increases.

Question

Quizplus · Accepted Answer

If actual GDP increases faster than potential GDP, this indicates an increase in overall economic activity and therefore an increase in demand for labor. This would likely result in a decrease in unemployment over time.

Unemployment Will Decrease Over Time If