An expansionary gap is equal to
A)real GDP minus nominal GDP
B)nominal GDP minus real GDP
C)actual short-run output minus potential output
D)this period's nominal GDP minus last period's nominal GDP
E)this period's real GDP minus last period's real GDP

Question

Quizplus · Accepted Answer

An expansionary gap occurs when actual short-run output exceeds potential output. This can occur due to factors such as increased consumer spending or government spending, which drives up demand for goods and services beyond what the economy can produce at full capacity. Therefore, the correct answer is C.

An Expansionary Gap Is Equal to