Figure 14.2
-Refer to Figure 14.2.Given the economy is at point A in year 1,what is the difference between the actual growth rate in GDP in year 2 and the potential growth rate in GDP in year 2?

Question

Figure 14.2 
-Refer to Figure 14.2.Given the economy is at point A in year 1,what is the difference between the actual growth rate in GDP in year 2 and the potential growth rate in GDP in year 2?

Quizplus · Accepted Answer

At point A, the actual growth rate in year 1 is 2 per cent and the potential growth rate is 3 per cent. Therefore, the output gap is -1 per cent. In year 2, the actual growth rate is 5 per cent and the potential growth rate is 7.7 per cent at point B. The difference between the actual and potential growth rates in year 2 is 2.7 per cent (7.7 - 5).

Figure 14.2 -Refer to Figure 14.2.Given the Economy Is at Point a at Point