The GDP gap is the difference between:
A) full-employment real GDP and real GDP chain price index.
B) unemployment rate and real GDP chain price index.
C) actual real GDP and full-employment real GDP.
D) frictional unemployment and actual real GDP.

Question

Quizplus · Accepted Answer

The GDP gap represents the difference between the actual level of real GDP and the potential level of real GDP, which is also referred to as full-employment real GDP. Therefore, the correct answer is C, which represents the difference between actual real GDP and full-employment real GDP. A represents the relationship between full-employment real GDP and the price level, B represents the relationship between unemployment rate and real GDP chain price index, and D represents the relationship between frictional unemployment and actual real GDP, none of which represent the GDP gap.

The GDP Gap Is the Difference Between