If potential output equals $5 billion and actual output equals $6.5 billion,then this economy has a(n)

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Quizplus · Accepted Answer

An expansionary gap occurs when actual output exceeds potential output, which is the case in this scenario. This suggests that the economy is operating above its long-run capacity and could lead to inflationary pressures. A budget deficit or trade deficit would refer to government spending and international trade, respectively, and are not relevant to this question. A recessionary gap would occur if actual output were below potential output. "Value-added gap" is not a commonly used economic term.

If Potential Output Equals $5 Billion and Actual Output Equals