If potential GDP is $19.04 trillion and actual GDP is $20.07 trillion, the output gap is:
A)1.03%.
B)5.13%.
C)5.41%.
D)-1.03%.

Question

Quizplus · Accepted Answer

The formula for the output gap is:

Output Gap = ((Potential GDP - Actual GDP) / Potential GDP) * 100

Substituting the given values, we get:

Output Gap = ((19.04 trillion - 20.07 trillion) / 19.04 trillion) * 100

Output Gap = (-1.03 trillion / 19.04 trillion) * 100

Output Gap = -5.41%

Note that the result is negative, which means that actual GDP is higher than potential GDP, indicating an expansionary gap. Therefore, the correct answer is C) 5.41%.

If Potential GDP Is $19