Question

When the current state of the economy is such that Real GDP is greater than Natural Real GDP, the economy is in a(n) ____________________ gap. In this situation, the (actual) unemployment rate is ___________ than the natural unemployment rate, and there is a ________________ in the labor market.

Answer 1

Answer:

Inflationary; lower; shortage

Explanation:

If the real GDP is higher than Natural Real GDP, this implies that the economy is in an inflationary gap.

This means that the economy is expanding. The real unemployment level is likely to be lower than the natural unemployment rate.

This means that there is no cyclical unemployment in the labor market and only structural and frictional unemployment exist.