The gap between actual and potential output
A) is a measure of the costs of inflation.
B) is a measure of what it costs society to tolerate less than full employment.
C) is necessary to ensure economic efficiency.
D) has always been positive.
E) is calculated as 3 × (unemployment rate - 0.055) × potential GDP.

Question

Quizplus · Accepted Answer

The gap between actual and potential output represents the amount of economic output that is lost when the economy operates below its full potential. This represents a cost to society in terms of lost production and income, as well as the social costs of unemployment and underutilization of resources. Therefore, option B is the correct choice.

The Gap Between Actual and Potential Output