In an inflationary gap, the cyclical unemployment rate is negative.

Name: In an inflationary gap, the cyclical unemployment rate is negative.
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Question

Quizplus · Accepted Answer

In an inflationary gap, the economy is operating above its potential output, which causes an increase in prices and inflation. This means that the actual unemployment rate is lower than the natural rate of unemployment, but it cannot be negative. Therefore, the statement is false.

In an Inflationary Gap, the Cyclical Unemployment Rate Is Negative