When the Unemployment Rate Is Less Than the Natural Unemployment

question 347

Multiple Choice

When the unemployment rate is less than the natural unemployment rate

• A) the output gap is positive.
• B) the output gap equals zero.
• C) the output gap is negative.
• D) None of the above is possible because it is impossible for the unemployment rate to be less than the natural rate.

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Definitions:

Trade Deficit

A state where the amount of goods and services brought into a country is higher than the amount sent out, leading to an adverse balance of trade.

Balance Of Trade

The difference in value between a country's exports and imports over a specific period, indicating the net earnings from international trade.

Goods

Physical items that are produced for sale and consumption to satisfy human wants, such as food, clothing, and cars.

Services

Intangible products such as healthcare, education, and banking, that provide value or meet needs without producing physical goods.