When more labor is unemployed than the amount at the natural unemployment rate, then real GDP __________potential GDP.
A) is less than
B) is greater than
C) is equal to
D) cannot be compared to

Question

Quizplus · Accepted Answer

When more labor is unemployed than the natural rate of unemployment, it means there is a cyclical unemployment present, which indicates that the economy is operating below its potential. As a result, real GDP would be less than potential GDP. Therefore, the correct choice is A) is less than.

When More Labor Is Unemployed Than the Amount at the Natural