When an economy's actual output differs from its potential at some point in time, we say that it is experiencing:
A) an output gap.
B) a recession.
C) a boom.
D) an inflationary gap.

Question

Quizplus · Accepted Answer

An output gap occurs when the actual output of an economy differs from its potential output. This can either be a positive output gap, where actual output is higher than potential output, or a negative output gap, where actual output is lower than potential output. A recession is a period of significant decline in economic activity, while a boom is a period of significant expansion in economic activity. An inflationary gap occurs when there is excessive demand for goods and services, leading to an increase in prices.

When an Economy's Actual Output Differs from Its Potential at Some