When the unemployment rate is less than the natural unemployment rate, real GDP is ________ than potential GDP and the output gap is ________.
A)greater; positive
B)smaller; positive
C)greater; negative
D)smaller; negative
E)greater; equal to zero

Question

Quizplus · Accepted Answer

When the unemployment rate is less than the natural rate, the economy is producing above its potential, making real GDP greater than potential GDP, resulting in a positive output gap.

When the Unemployment Rate Is Less Than the Natural Unemployment