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

Question

Quizplus · Accepted Answer

In the short run, the equilibrium level of real GDP can be less than, equal to, or greater than potential GDP. This is because in the short run, the economy can operate below or above its potential level due to factors such as fluctuations in aggregate demand and supply, changes in consumer and business confidence, and government fiscal and monetary policies. Therefore, the equilibrium level of real GDP can vary in the short run.

In the Short Run, the Equilibrium Level of Real GDP