The GDP gap measures the:
A)difference between NDI and GDP.
B)amount by which potential GDP exceeds actual GDP.
C)amount by which actual GDP exceeds NDI.
D)amount by which nominal GDP exceeds real GDP.

Question

Quizplus · Accepted Answer

The GDP gap measures the amount by which potential GDP exceeds actual GDP, which is option B. Option A is incorrect because NDI (Net Domestic Income) is not a commonly used economic variable. Option C is incorrect because actual GDP cannot exceed NDI as NDI is a component of GDP itself. Option D is incorrect because the difference between nominal GDP and real GDP is commonly referred to as the GDP deflator, which is different from the concept of the GDP gap.

The GDP Gap Measures The