If the economy is in short run equilibrium then
A) real GDP equals potential GDP.
B) nominal GDP equals potential GDP.
C) real GDP cannot be equal to potential GDP.
D) real GDP can be greater than, less than, or equal to potential GDP.

Question

Quizplus · Accepted Answer

In short run equilibrium, the economy's actual output (real GDP) can vary around its potential output (potential GDP) due to cyclical, frictional, or structural factors. This means real GDP can be above, below, or exactly equal to potential GDP, depending on the economic conditions at the time.

If the Economy Is in Short Run Equilibrium Then