In 2011, real GDP in the United States was below potential GDP. This fact definitely means that

Question

Quizplus · Accepted Answer

When real GDP is below potential GDP, it indicates that the economy is operating below its full capacity. As a result, businesses may not be able to sell all their goods and services, leading to a decline in profits, and causing them to reduce output and lay off workers. This results in a higher unemployment rate, which is above the natural unemployment rate. Therefore, choice B is the correct answer. The other choices are incorrect because a lower real GDP does not necessarily mean the economy is in an expansion or that cyclical unemployment has been decreasing, and frictional unemployment cannot be negative.

In 2011, Real GDP in the United States Was Below