In which of the following cases is the output gap zero?
A) When consumer con?dence declines due to bad economic performance.
B) When the economy operates on its production possibility frontier.
C) When unemployment increases due to an increase in real wages.
D) When in?ation in the economy is equal to its target level.

Question

Quizplus · Accepted Answer

The output gap is zero when an economy is producing at its maximum potential, which occurs when it operates on its production possibility frontier. This means all resources are being used efficiently, and the actual output equals potential output.

In Which of the Following Cases Is the Output Gap