Final answer:
When real GDP is greater than natural real GDP, the economy is in an expansion. An expansion indicates that the economy is growing and performing above its long-term trend. option b.
Step-by-step explanation:
If real GDP is greater than natural real GDP, the economy is in a expansion. The correct answer from the options given is 2) expansion. A recession is characterized by a significant decline in real GDP, whereas an expansion indicates a period where the economy is growing and real GDP is rising. Real GDP rising beyond the natural level suggests that the economy is performing above its long-term average trend, which is typically associated with periods of economic expansion. However, prolonged periods of expansion can lead to overheating and potential inflationary issues. It's important to monitor such economic indicators to understand the health of the economy and make informed decisions.