When does actual output fall below potential output?
A) during a recession
B) when aggregate demand exceeds aggregate supply
C) when the natural rate of unemployment exceeds the actual rate of unemployment
D) when the natural rate of unemployment is zero

Question

When does actual output fall below potential output?  
A) during a recession 
B) when aggregate demand exceeds aggregate supply 
C) when the natural rate of unemployment exceeds the actual rate of unemployment 
D) when the natural rate of unemployment is zero

Quizplus · Accepted Answer

Actual output falls below potential output during a recession when there is a significant decline in economic activity and a rise in unemployment.

When Does Actual Output Fall Below Potential Output