When the output gap is _____, the unemployment rate is _____ the natural rate.
A) negative; below
B) zero; zero
C) inflationary; above
D) positive; below

Question

Quizplus · Accepted Answer

When the output gap is positive, it means the economy is producing above its potential, which typically leads to lower unemployment rates as more workers are needed, hence the unemployment rate is below the natural rate.

When the Output Gap Is _____, the Unemployment Rate Is