Higher unemployment tends to be associated with
A) the classical model.
B) higher real GDP.
C) higher nominal GDP.
D) lower real GDP.

Question

Quizplus · Accepted Answer

According to the classical model, there is a natural rate of unemployment in the economy, which means that higher unemployment rates may indicate a deviation from the natural rate, suggesting lower real GDP. Higher unemployment also means a decrease in consumer spending, leading to lower aggregate demand and lower real GDP.

Higher Unemployment Tends to Be Associated with