Which of the following can be responsible for a change in the output gap?
A)an increase in potential GDP
B)a decrease in actual GDP
C)a decrease in aggregate demand
D)all of the above
E)only A and B

Question

Quizplus · Accepted Answer

All of the options listed can be responsible for a change in the output gap. An increase in potential GDP would shift the long-run aggregate supply (LRAS) curve to the right, resulting in a higher potential output and reducing the output gap. A decrease in actual GDP would mean that the economy is producing less than its potential, leading to a larger output gap. A decrease in aggregate demand would shift the short-run aggregate supply (SRAS) curve to the right, resulting in a lower equilibrium output and a larger output gap. Thus, all three options can affect the output gap.

Which of the Following Can Be Responsible for a Change