Question

If the actual rate of unemployment is below the natural rate of unemployment, then potential GDP is_____.

a.less than actual GDP.
b.equal to the GDP gap.
c.equal to actual GDP.
d.greater than actual GDP.

Answer 1

less than actual gdp

Step-by-step explanation:

When the unemployment rate is below the natural unemployment rate, real GDP is above potential GDP.

Answer 2

If the actual rate of unemployment is below the natural rate, potential GDP is greater than actual GDP (d).

Step-by-step explanation:

When the actual rate of unemployment is below the natural rate of unemployment, potential GDP is greater than actual GDP(d). The natural unemployment rate refers to the level of unemployment that exists when the economy is at full employment. At full employment, real GDP is equal to potential real GDP. When the actual rate of unemployment falls below the natural rate, it indicates that the economy is operating below its potential and is not utilizing all available resources. This leads to a lower level of actual GDP compared to potential GDP. Therefore, the correct answer is d. greater than actual GDP.