During the last half of 1980,the U.S.unemployment rate was about 7.5 percent.Historical experience suggests that this is
A)above the natural rate, so that real GDP growth was likely low.
B)above the natural rate, so that real GDP growth was likely high.
C)below the natural rate, so that real GDP growth was likely low.
D)below the natural rate, so that real GDP growth was likely high.

Question

Quizplus · Accepted Answer

The natural rate of unemployment is the rate of unemployment that exists when the labor market is in equilibrium and there is no cyclical unemployment. In other words, it is the unemployment rate that would exist in the absence of short-term economic fluctuations. Historical data suggest that the natural rate of unemployment in the U.S. is around 5 percent. Therefore, when the actual unemployment rate is higher than 5 percent, it is considered above the natural rate. Since the actual unemployment rate during the last half of 1980 was 7.5 percent, it is above the natural rate. This implies that the real GDP growth was likely low, as high unemployment rates are often associated with low economic growth.

During the Last Half of 1980,the U