If, at the prevailing rate of inflation, real GDP is greater than potential GDP, the economy has not fully recovered from a recession.

Question

Quizplus · Accepted Answer

If real GDP is greater than potential GDP, it means that the economy is overheating and producing more than it is capable of producing in the long run. This situation is characterized by higher inflation rates, tighter labor markets, and rising interest rates. It does not necessarily indicate that the economy has not fully recovered from a recession, but rather that it is potentially facing a new set of challenges such as inflationary pressures.

If, at the Prevailing Rate of Inflation, Real GDP Is