In the short run, the equilibrium level of real GDP
A) is necessarily greater than potential GDP.
B) is necessarily equal to potential GDP.
C) is necessarily less than potential GDP.
D) could be less than, equal to, or greater than potential GDP.

Question

Quizplus · Accepted Answer

In the short run, the equilibrium level of real GDP could be less than, equal to, or greater than potential GDP. This is because short-run fluctuations in aggregate demand can cause GDP to deviate from its potential level, and the economy may operate below or above its long-run potential.

In the Short Run, the Equilibrium Level of Real GDP