Real GDP
A)moves in the opposite direction as unemployment.
B)increases as production falls.
C)falls when households save a smaller fraction of their income.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

Real GDP and unemployment generally have an inverse relationship, meaning when one goes up the other goes down. When the economy is doing well, employment levels tend to rise, while a recession or economic downturn typically leads to higher unemployment rates.

Option B is incorrect because Real GDP decreases when there is a decline in production, while it increases when there is greater output of goods and services.

Option C is also incorrect because Real GDP will actually increase when households save a smaller fraction of their income, as then they are spending more and boosting economic activity.