An output gap is
A) negative during a recession.
B) positive during an recession.
C) negative if real GDP is below potential GDP.
D) positive if real GDP is below potential GDP.
E) positive during an expansion.

Question

Quizplus · Accepted Answer

An output gap is the difference between actual GDP and potential GDP. If actual GDP is below potential GDP, there is a negative output gap. Therefore, choice C is the best answer.

An Output Gap Is