If unemployment is above its sustainable level, then the economy is:
A)experiencing above normal growth rates.
B)operating above capacity, and inflation will likely rise.
C)operating below capacity, and inflation will likely fall.
D)at potential GDP, and inflation is at its target level.

Question

Quizplus · Accepted Answer

When unemployment is above its sustainable level, it indicates that the economy is operating below its capacity. This underutilization of resources often leads to lower demand for goods and services, which can put downward pressure on prices and inflation.

If Unemployment Is Above Its Sustainable Level, Then the Economy