When the economy is at its potential output level,which of the following is not true?
A)Firms' and workers' expectations about the price level are realized.
B)The nominal wage is a good measure of the expected real wage.
C)The unemployment rate is about 2 percent.
D)The economy is producing its maximum sustainable output.
E)The actual price level equals the expected price level.

Question

Quizplus · Accepted Answer

When the economy is at its potential output level, the unemployment rate is typically at its natural rate of unemployment, which is considered to be around 4-5% in the US. Therefore, option C is not true as the unemployment rate at potential output is not about 2%.

When the Economy Is at Its Potential Output Level,which of the Following