On September 15, 2014, the OECD predicted that global growth would continue at a moderate rate and that Canada's economic growth will strengthen. If the OECD forecasts turn out to be correct, and Canada is in a below full-employment equilibrium in 2014 (but close to full employment), then in 2015 and 2016 the output gap will ________ and unemployment will ________.
A)increase; decrease
B)decrease or even reverse; increase
C)decrease or even reverse; decrease
D)increase; increase
E)decrease; not change

Question

Quizplus · Accepted Answer

According to the OECD's prediction of global growth continuing at a moderate rate, Canada's economic growth is expected to strengthen. This would lead to a decrease or even reversal in the output gap, indicating that the economy is reaching or surpassing full employment. Therefore, unemployment will also decrease as the labor market tightens. The correct answer is choice C, which states that the output gap will decrease or even reverse and unemployment will decrease.

On September 15, 2014, the OECD Predicted That Global Growth