Question

How does the unemployment rate fluctuate over the business cycle? Unemployment rate (percentage of labor force) When the unemployment rate is greater than the natural unemployment rate, the output gap is When the unemployment rate is less than the natural unemployment rate, the output gap is 1044 Unemployment rate nis O A. positive; negative B. negative; positive O C. negative; zero OD. zero; positive Natural unemployment rate The graph shows the unemployment rate and the natural unemployment rate between 1980 and 2017. Draw a point that shows the unemployment rate when: 1) real GDP is less than potential GDP. Label it 1. 2) real GDP is greater than potential GDP. Label it 2 3) real GDP is equal to potential GDP. Label it 3. 1980 1985 1990 1995 2000 2005 2010 2015 2020 Year >>> Draw only the objects specified in the question.

Answer 1

When unemployment rate > natural unemployment rate, less good would be produced than the potential level which creates a negative output gap.

When unemployment rate < natural unemployment rate, more goods would be produced (as there are more people on board) than the potential level which creates a positive output gap.

Option B is correct.

Real GDP < Potential GDP (less goods are produced than the potential level) happens when unemployment rate > natural unemployment rate (less people are on job which produces less good). It is colored in red.

Real GDP = Potential GDP (equal goods are produced equal to potential level) happens when unemployment rate = natural unemployment rate (enough people are on job which produces good). It is colored in blue.

Real GDP > Potential GDP (more goods are produced than the potential level) happens when unemployment rate < natural unemployment rate (more people are on job which produces more good, raises the GDP). It is colored in black.

Unemployment rate (percentage of labor force) Unemployment rate Natural unemployment te 1980 1985 1990 1995 2000 2005 2010 2015 2020 Year