Which of the following three situations is least likely to occur at the same time as...

Which of the following three situations is least likely to occur at the same time as the other two situations? Why?

a-Real GDP is less than potential GDP.  
b-An economy in a strong, 5-year expansion.  
c-An unemployment rate above the natural rate of unemployment.

Solutions

Expert Solution

ANS:

(b) ; An economy in a strong, 5-year expansion as

Expansion is the phase of the business cycle when the economy moves from a trough to a peak. Expansions last on average about four to five years but have been known to go on anywhere from 12 months to more than 10 years.

The natural rate of unemployment is the unemployment rate that would exist in a growing and healthy economy. ... By contrast, when the economy is below full employment, the unemployment rate is greater than the natural unemployment rate and real GDP is less than potential.

Rahul Sunny answered 1 year ago

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