In periods when GDP fails to grow at its normal rate, the actual unemployment rate will be ________ than the natural rate of unemployment.
A) lower
B) higher
C) the same
D) falling faster

Question

Quizplus · Accepted Answer

During periods of slow GDP growth, demand for labor decreases, leading to a higher rate of unemployment than the natural rate. This is because the natural rate reflects the "frictional" unemployment that occurs in a healthy labor market, while cyclical unemployment arises due to the business cycle.

In Periods When GDP Fails to Grow at Its Normal