Suppose that the unemployment rate equals 4.5 percent and that the natural unemployment rate is 5.5 percent. We can conclude that
A) the output gap is negative.
B) the output gap equals zero.
C) the output gap is positive.
D) we have mismeasured the natural unemployment rate.
Question 2
Demand is price elastic if a
A) relatively large price increase leads to a relatively small decrease in the quantity demanded.
B) relatively small price increase leads to a relatively large decrease in the quantity demanded.
C) price increase leads to a decrease in the quantity demanded.
D) price increase leads to an increase in the quantity demanded.
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