Refer to Figure 10.2 for the following questions.
Figure 10.2

-Refer to Figure 10.2. Given the economy is at point A in year 1, what is the difference between the actual growth rate in GDP in year 2 and the potential growth rate in GDP in year 2?
A)0.3%
B)1.1%
C)2.7%
D)3.7%

Question

Refer to Figure 10.2 for the following questions.
Figure 10.2
 
-Refer to Figure 10.2. Given the economy is at point A in year 1, what is the difference between the actual growth rate in GDP in year 2 and the potential growth rate in GDP in year 2?
A)0.3% 
B)1.1% 
C)2.7% 
D)3.7%

Quizplus · Accepted Answer

At point A, the actual growth rate in GDP in year 1 is 3%, while the potential growth rate in GDP in year 1 is 2%. If the economy continues to grow along the production possibilities frontier to point B, the potential growth rate in year 2 would be 2.3%. However, the actual growth rate in year 2 at point C is 5%. The difference between the actual growth rate and the potential growth rate in year 2 is 5% - 2.3% = 2.7%. Therefore, the correct answer is C.

Refer to Figure 10.2 for the Following Questions