If the natural rate of unemployment is 6 percent, what is the actual rate of unemployment if output is 2 percent below potential?

Question

Quizplus · Accepted Answer

The actual rate of unemployment is 7 percent if output is 2 percent below potential because the natural rate of unemployment is 6 percent and the output gap is -2 percent. The output gap is the difference between actual output and potential output, and a negative output gap indicates that the economy is operating below its potential. When the economy is operating below its potential, there is less demand for labor and the unemployment rate is higher.

If the Natural Rate of Unemployment Is 6 Percent, What