The unemployment rate will fall if potential output growth is:
A) higher than actual output growth.
B) lower than actual output growth.
C) equal to actual output growth.
D) higher than the inflation rate.

Question

Quizplus · Accepted Answer

When potential output growth is lower than actual output growth, it means the economy is growing faster than its long-term sustainable rate, leading to increased demand for labor and thus a decrease in the unemployment rate.

The Unemployment Rate Will Fall If Potential Output Growth Is