Final Answer:
When actual unemployment exceeds the natural rate, it indicates an economic expansion, where demand for labor is high, leading to a lower overall unemployment rate. The option C. is correct.
Step-by-step explanation:
When the actual rate of unemployment exceeds the natural rate, it indicates a situation where the economy is operating beyond its long-term sustainable capacity, typically associated with an expansionary phase. The natural rate of unemployment consists of frictional and structural unemployment, representing the minimum level of unemployment that can persist in the long run. If the actual rate surpasses this natural rate, it suggests a state of excess demand for labor, which commonly occurs during economic expansions.
During expansions, businesses are thriving, leading to increased demand for goods and services. This heightened economic activity usually translates into a higher demand for labor, causing the actual unemployment rate to fall below the natural rate. In such a scenario, job opportunities are abundant, and individuals find employment relatively easily, resulting in a lower overall unemployment rate. This is a characteristic feature of an economy in an expansionary phase.
In summary, if the actual rate of unemployment surpasses the natural rate, the economy is likely experiencing an expansion, marked by increased economic activity and a lower overall unemployment rate. Therefore option C. is correct.
Complete Question:
If the actual rate of unemployment is above the natural rate of unemployment, then:
A) Structural unemployment is less than zero.
B) Frictional unemployment is less than zero.
C) The economy is in an expansion.