When Real GDP Is Less Than Potential Output,the Unemployment Rate

question 114

Multiple Choice

When real GDP is less than potential output,the unemployment rate ________ the NAIRU.

• A)falls toward
• B)falls below
• C)rises toward but never exceeds
• D)is equal to
• E)rises above

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Definitions:

Sticky Downward

Describes prices or wages that are resistant to decrease even in conditions where economic theory suggests they should fall, contributing to slow adjustments in markets.

Long-run Aggregate Supply

Long-run aggregate supply represents the total output of goods and services that an economy can produce when it is operating at full capacity, unaffected by the price level in the long term.

Resource Prices

The costs associated with procuring the natural, human, and capital resources needed for producing goods and services.

Natural Rate

The unemployment rate or level of activity achieved in an economy when it is at full employment, without accelerating inflation.