If real GDP is less than potential GDP, then the economy is ____________equilibrium.
A) at a below full-employment
B) not in short-run macroeconomic
C) in long-run macroeconomic
D) at an above full-employment

Question

Quizplus · Accepted Answer

When real GDP is less than potential GDP, it means that the economy is operating below its full-employment level. This is because potential GDP represents the maximum level of output that an economy can produce in the long run with all resources fully employed. Therefore, the economy is not in equilibrium and there are unused resources such as labor and capital.

If Real GDP Is Less Than Potential GDP, Then the Economy