Question

Match the level of unemployment with the condition of the overall economy. Unemployment equals the natural rate. Cyclical unemployment equals zero. Unemployment is below the natural rate. Unemployment is above the natural rate. Actual GDP is below potential GDP. Actual GDP is equal to potential GDP. Actual GDP is above potential GDP.

Answer 1

To match levels of unemployment to economic conditions: Unemployment at the natural rate means GDP is at potential; zero cyclical unemployment also indicates potential GDP while unemployment below the natural rate or above it indicates actual GDP is above or below potential GDP, respectively.

Step-by-step explanation:

When matching the level of unemployment with the condition of the overall economy, here are the relationships:

• When unemployment equals the natural rate, the economy is considered to be at full employment, and hence actual GDP is equal to potential GDP.
• If cyclical unemployment equals zero, this also indicates that the economy is at full employment and production is at potential GDP level.
• When unemployment is below the natural rate, this typically means the economy is overheated or growing above its sustainable capacity, leading to actual GDP being above potential GDP.
• Conversely, if unemployment is above the natural rate, it suggests the economy is underperforming or in a downturn, thus actual GDP falls below potential GDP.

Answer 2

Note: The organized question is attached as picture

1. Actual GDP is below potential GDP

Level of unemployment: Unemployment is above the natural rate

2. Actual GDP is equal to potential GDP

Level of unemployment: Unemployment equals the natural rate

3. Actual GDP is above potential GDP

Level of unemployment: Unemployment is below the natural rate