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What is Potential GDP and a GDP Gap? If the unemployment rate is 8.6% is the economy operating above or below potential GDP?

Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter9: Classical Macro Economics And The Self Regulating Economy

Section9.2: Three States Of The Economy

Problem 2ST

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Question

What is Potential GDP and a GDP Gap? If the unemployment rate is 8.6% is the economy operating above or below potential GDP?

Definition Definition State in which an individual is without work, despite actively seeking employment opportunities. The unemployment rate refers to the percentage of the workforce that is currently unemployed. Unemployment is one of the key indicators of the conditions prevailing in an economy. It is therefore considered a barometer that points out the condition of an economy.

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