If short-run output is greater than potential output, then:
A) the unemployment rate in the economy is zero.
B) frictional unemployment is less than its natural rate.
C) frictional unemployment is greater than its natural rate.
D) structural unemployment is greater than frictional unemployment.

Question

Quizplus · Accepted Answer

When short-run output exceeds potential output, it typically means the economy is operating above its long-term sustainable level, often leading to lower unemployment rates than normal. This can result in frictional unemployment (short-term unemployment as people move between jobs) being lower than its natural rate, as jobs are plentiful and people can find new positions more easily.

If Short-Run Output Is Greater Than Potential Output, Then