In any year, real GDP

Question

Quizplus · Accepted Answer

Real GDP can be greater than, less than, or equal to potential GDP depending on the current state of the economy. It can be affected by factors such as changes in consumption, investment, government spending, net exports, and technology. Therefore, the statement in option A is not always true. Option B is incorrect because real GDP can exceed potential GDP due to temporary factors like a surge in demand or supply shocks. Option D is incorrect because potential GDP refers to the maximum level of output an economy can produce in the long run, whereas real GDP reflects the actual level of output in the current period. Option E is incorrect because inflation is a separate phenomenon and does not necessarily lead to an increase in real GDP.

In Any Year, Real GDP