Question

Suppose the natural rate of unemployment is 4 percent. What is the actual rate of unemployment if actual output is 2 percent above potential output?

A. 2 percent
B. 0 percent
C. 3 percent
D. 6 percent

Answer 1

The actual rate of unemployment would be lower than 4 percent.

Step-by-step explanation:

The actual rate of unemployment can be determined by considering the difference between actual output and potential output. In this case, if the actual output is 2 percent above potential output, it means the economy is operating above its potential level. With a natural rate of unemployment of 4 percent, the actual rate of unemployment will be below this level. Therefore, the actual rate of unemployment would be lower than 4 percent. From the given options, the closest answer would be B. 0 percent.