Final answer:
The statement that an increase in real GDP implies a decrease in unemployment is generally true as more production typically requires more workers, leading to decreased unemployment. However, there are exceptions, such as when productivity gains occur independently of labor input increases. The typical result is a shrinking recessionary gap and reduced unemployment as firms hire more to meet the demand.
Step-by-step explanation:
A student asked whether an increase in real GDP implies a decrease in unemployment, assuming a given labor force. The statement is generally true, as real GDP is a measure of a country's economic output adjusted for inflation, and it reflects the total value of all goods and services produced over a specific time period. When real GDP increases, it typically indicates that more goods and services are being produced, which usually requires more workers, hence reducing unemployment.
However, there may be exceptions to this, such as when productivity increases (e.g., through technological advances) without a corresponding increase in the labor force or hours worked. In such cases, real GDP could rise while employment remains stable or even decreases. Yet, in the typical scenario where productivity remains constant, an increase in real GDP would result from more people being employed or existing workers working more hours, thus leading to a decrease in the unemployment rate.
For example, if the aggregate expenditure increases, GDP may reach full employment level, reducing the recessionary gap, which is the distance between the current output level and the potential GDP level. This means firms are hiring more workers to meet the increased demand, leading to lower unemployment.