In 2015, Adanac produced 20 kilos of apples and 30 kilos of bananas. Both fruits were used exclusively for final consumption and nothing else was produced. In 2015, a kilo of apples sold for $5 while a kilo of bananas sold for $10. Using the same prices, economists estimate that potential GDP is $300. The output gap is

Question

Quizplus · Accepted Answer

Potential GDP is the value of all final goods and services produced in an economy at full employment. In this case, the potential GDP is $300. The output gap is the difference between potential GDP and actual GDP. Actual GDP is the value of all final goods and services produced in an economy at a given point in time. In this case, the actual GDP is $250. Therefore, the output gap is $300 - $250 = $50. However, the question asks for the output gap in terms of dollars, not kilos. To convert the output gap from kilos to dollars, we need to multiply the output gap by the price of a kilo of apples or bananas. In this case, we will use the price of a kilo of apples, which is $5. Therefore, the output gap is $50 * $5 = $250. The correct answer is D) + $100.

In 2015, Adanac Produced 20 Kilos of Apples and 30