When real GDP
A) equals potential GDP, the natural rate of unemployment equals zero.
B) is above potential GDP, the unemployment rate is above the natural rate.
C) is above potential GDP, there is less than normal frictional, structural, seasonal unemployment.
D) is below potential GDP, the unemployment rate is below the natural rate of unemployment.
E) equals potential GDP, frictional unemployment equals zero.

Question

Quizplus · Accepted Answer

When real GDP is above potential GDP, the economy is operating at a level of output higher than what it can sustain in the long run, which typically results in lower unemployment rates than normal. This includes reductions in frictional (time spent between jobs), structural (mismatch between skills and job requirements), and seasonal (variations in employment due to seasonal patterns) unemployment, as demand for labor is high.

When Real GDP