In the short run, the equilibrium level of real GDP
A) is necessarily less than potential GDP.
B) is necessarily equal to potential GDP.
C) is necessarily greater than potential GDP.
D) could be less than, equal to, or greater than potential GDP.

Question

Quizplus · Accepted Answer

In the short run, the equilibrium level of real GDP can vary due to fluctuations in demand and supply. It can be less than potential GDP during a recession, equal to potential GDP when the economy is at full employment, or greater than potential GDP during a boom.

In the Short Run, the Equilibrium Level of Real GDP