The amount by which actual GDP falls short of potential GDP is one measure of the:

Question

Quizplus · Accepted Answer

When actual GDP falls short of potential GDP, it indicates that there is an underutilization of resources in the economy, including labor resources. This underutilization results in higher unemployment rates, which implies a macroeconomic cost of unemployment. Therefore, the amount by which actual GDP falls short of potential GDP is one measure of the macroeconomic cost of unemployment.

The Amount by Which Actual GDP Falls Short of Potential