When actual output is below potential output
A) the economic costs of unemployment are zero.
B) everyone actively seeking a job can easily find one.
C) extreme inflationary pressure prevails.
D) less than 95 percent of the labor force is employed.
E) the economy is producing on its production possibilities curve.

Question

Quizplus · Accepted Answer

When actual output is below potential output, there is a slack in the economy which leads to unemployment. Hence, less than 95 percent of the labor force is employed.

When Actual Output Is Below Potential Output