What is the relationship over the business cycle of potential GDP and real GDP?

What will be an ideal response?


The level of output that the economy would produce if it was at full employment is called potential GDP. However, the economy is not always at full employment. In a recession, employment is less than full employment and so real GDP is less than potential GDP. And, in an expansion, employment can exceed full employment so that real GDP exceeds potential GDP.

Economics

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Real business cycle theory emphasizes the role of ________ in causing economic fluctuations

A) agriculture B) technological change C) natural disasters D) wars

Economics

The state Department of Agriculture raised the minimum price for a gallon of milk in the city on Tuesday to $4.37

"If you've got two or three kids and you're living on a fixed income and you're paying half your income on rent," Gioia said, "then you're really in a bind and you're making choices you should never have to make." If even after this price increase Gioia's marginal utility per dollar is higher for milk than for other goods, what should Gioia do? A) increase her consumption of milk B) decrease her consumption of milk C) not change her consumption of milk D) increase her consumption of milk only if her income increases

Economics

Peter's Pizzeria sells both pizzas and wings. It wants to increase the sales of its pizzas. Assuming that the pizza and the wings are complements, which of these strategies can it employ?

a. Increase the price of the wings b. Decrease the price of the wings c. Increase the quality of the pizza d. Both B & C

Economics

In economics, the demand for a good refers to the amount of the good people:

a. would like to have if the good were free. b. are willing to buy at various prices. c. need to achieve a minimum standard of living. d. will buy at alternative income levels.

Economics