If real GDP is increasing at a 2 percent annual rate while the unemployment rate is 7 percent,the economy is
A) not achieving full economic potential
B) experiencing an increase of 2 percent in real annual per capita GDP
C) experiencing a slump
D) experiencing high prices and low inflation
E) producing along its production possibilities frontier

Question

Quizplus · Accepted Answer

A 2 percent annual increase in real GDP is below the historical average for the US economy, and an unemployment rate of 7 percent indicates that there is still a significant amount of labor market slack. Therefore, the economy is not achieving full economic potential.

If Real GDP Is Increasing at a 2 Percent Annual