If we cannot accurately measure potential GDP:
A) we might overestimate the severity of a recession.
B) we may adopt the wrong fiscal or monetary policy.
C) we will never know the true state of the economy.
D) All of these answers are correct.
E) None of these answers is correct.

Question

Quizplus · Accepted Answer

If we cannot accurately measure potential GDP, we are likely to make erroneous assessments of the state of the economy, overestimate or underestimate the severity of a recession, and potentially adopt inappropriate fiscal or monetary policies. Therefore, all of the answer choices are correct.

If We Cannot Accurately Measure Potential GDP