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

Question

Quizplus · Accepted Answer

When more labor is unemployed than the amount at the natural unemployment rate, it indicates that the economy is not utilizing its resources efficiently, leading to real GDP being less than potential GDP. Potential GDP represents the maximum amount of goods and services an economy can produce when it is most efficient, which is not achieved when unemployment is higher than the natural rate.

When More Labor Is Unemployed Than the Amount at the Natural