Which of the following statements is TRUE?
A) Real GDP fluctuates around potential GDP.
B) Potential GDP fluctuates around real GDP.
C) Potential GDP is the same as real GDP.
D) When all of the economy's resources are fully employed, the value of production is called real GDP.

Question

Quizplus · Accepted Answer

Real GDP does fluctuate around potential GDP because potential GDP represents the level of output the economy could achieve if it were operating at full capacity, while real GDP is the actual output, which can be above or below potential due to economic cycles.

Which of the Following Statements Is TRUE