When actual unemployment is less than its natural rate,the
A) economy is expanding beyond its long-run capabilities.
B) economy is producing within its long-run capabilities.
C) numbers must be wrong because the actual unemployment rate can never be less than the natural rate.
D) economy is in a recession.
E) economy must be experiencing high inflation.

Question

Quizplus · Accepted Answer

When actual unemployment falls below its natural rate, it means that the economy is producing at a level beyond its long-run capabilities. This can lead to an overheating of the economy, which can result in higher inflation and the potential for a future recession.

When Actual Unemployment Is Less Than Its Natural Rate,the