Answer: The quantity of GDP at full employment is called potential GDP. Over the business cycle, real GDP fluctuates around potential GDP. When the unemployment rate is higher than the natural rate, real GDP is less than potential GDP and when the unemployment rate is lower than the natural rate, real GDP exceeds potential GDP.
Answer: The quantity of GDP at full employment is called potential GDP. Over the business cycle, real GDP fluctuates around potential GDP. When the unemployment rate is higher than the natural rate, real GDP is less than potential GDP and when the unemployment rate is lower than the natural rate, real GDP exceeds potential GDP.
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