In macroeconomics,what is the output gap?
A)the measure of output that could have been produced if the economy were fully employed
B)the dead-weight loss of inflation
C)the difference between nominal and real output
D)the percentage change in real GDP
E)the difference between Y and Y*

Question

Quizplus · Accepted Answer

The output gap is defined as the difference between actual output (Y) and potential output (Y*), which is the measure of output that could have been produced if the economy were fully employed. Therefore, option E is the correct choice. Option A is partially correct but lacks the reference to full employment, which is what defines potential output. Option B is not related to the concept of output gap. Option C is the difference between nominal and real GDP, and while it can be affected by changes in the output gap, it is not a measure of the gap itself. Option D is the percentage change in real GDP, which is not the same as the output gap.

In Macroeconomics,what Is the Output Gap