Which of the following is not true when there is an inflationary gap?
A)Real output exceeds the natural level of real output.
B)Employment exceeds full employment.
C)Unemployment exceeds the natural rate of unemployment.
D)All of the above are not true when there is an inflationary gap.

Question

Which of the following is not true when there is an inflationary gap?
A)​Real output exceeds the natural level of real output.
B)​Employment exceeds full employment.
C)​Unemployment exceeds the natural rate of unemployment.
D)​All of the above are not true when there is an inflationary gap.

Quizplus · Accepted Answer

When there is an inflationary gap, real output exceeds the natural level of real output and employment may exceed full employment. However, unemployment cannot exceed the natural rate of unemployment, as the natural rate is the level of unemployment that exists when the economy is at potential output. In an inflationary gap, the economy is producing above potential output, so unemployment is lower than the natural rate.

Which of the Following Is Not True When There Is