According to the AS-AD model, when real GDP is less than potential GDP the unemployment rate is definitely
A)equal to the natural unemployment rate.
B)falling.
C)rising.
D)less than the natural unemployment rate.
E)greater than the natural unemployment rate.

Question

Quizplus · Accepted Answer

When real GDP is less than potential GDP, the economy is not producing at full capacity, leading to higher unemployment than the natural rate.

According to the AS-AD Model, When Real GDP Is Less