If the economy is in short run equilibrium then
A) nominal GDP equals potential GDP.
B) real GDP equals potential GDP.
C) real GDP can be greater than, less than, or equal to potential GDP.
D) real GDP cannot be equal to potential GDP.

Question

Quizplus · Accepted Answer

In short run equilibrium, real GDP can be greater than, less than, or equal to potential GDP. This is because short run equilibrium reflects the current state of the economy, which can be influenced by various factors such as changes in consumer spending, government policies, or investment decisions. As a result, real GDP may not necessarily be at its potential level in the short run.

If the Economy Is in Short Run Equilibrium Then