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When the economy is below full employment, real GDP is described as:
AEqual to potential
BImpossible to define
CLess than potential
DMore than potential
Answer & Solution
Correct answer: C. Less than potential
1. Unemployment and output move together across the cycle.
2. Below full employment, the unemployment rate exceeds the natural rate.
3. At the same time, real GDP is less than potential.
4. Idle workers mean output below what the economy could produce.
_Source: OpenStax Principles of Macroeconomics for AP Courses 2e (CC BY 4.0), Ch 7 'Unemployment'_
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