When output is below its potential, what would most likely be happening in the e

Question

When output is below its potential, what would most likely be happening in the economy? A. The unemployment rate is equal to its target rate and the capacity utilization rate is above its target rate. B. The unemployment rate is below its target rate and the capacity utilization rate is equal to its target rate. C. The unemployment rate is above its target rate and the capacity utilization rate is equal to its target rate. D. The unemployment and capacity utilization rates are equal to their target rates.

Explanation / Answer

C. The unemployment rate is above its target rate and the capacity utilization rate is equal to its target rate.

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