Figure 1-2
-When the actual real GDP exceeds the natural real GDP as in the figure above, we expect to find that unemployment is
A) high and inflation is high.
B) low and inflation is high.
C) low and inflation is low.
D) high and inflation is low.

Question

Figure 1-2 
-When the actual real GDP exceeds the natural real GDP as in the figure above, we expect to find that unemployment is
A) high and inflation is high. 
B) low and inflation is high. 
C) low and inflation is low. 
D) high and inflation is low.

Quizplus · Accepted Answer

When actual real GDP exceeds natural real GDP, the economy is operating above its potential, leading to lower unemployment and higher inflation due to increased demand pressures.

Figure 1-2 -When the Actual Real GDP Exceeds the Natural Real GDP