During the last half of 1980, the U.S. unemployment rate was about 7.5 percent. Historical experience suggests that this is
A)above the natural rate, so real GDP growth was likely low.
B)above the natural rate, so real GDP growth was likely high.
C)below the natural rate, so real GDP growth was likely low.
D)below the natural rate, so real GDP growth was likely high.

Question

Quizplus · Accepted Answer

The natural rate of unemployment is the rate at which there is no cyclical unemployment, meaning that employment is at its long-run equilibrium level. Therefore, an unemployment rate above the natural rate implies that there is cyclical unemployment, which is associated with lower real GDP growth.

During the Last Half of 1980, the U