How much is the output gap if short-run output is $21.0 trillion and potential output is $20.0 trillion?
A) $20.0 trillion
B) +$1.0 trillion
C) -$1 trillion
D) -$0.1 trillion
E) $0

Question

Quizplus · Accepted Answer

The output gap is calculated as potential output minus short-run output. Therefore,
output gap = potential output - short-run output
output gap = $20.0 trillion - $21.0 trillion
output gap = -$1.0 trillion
So the output gap is -$1.0 trillion, which means the economy is producing $1.0 trillion less than its potential. The correct choice is B.

How Much Is the Output Gap If Short-Run Output Is