If real GDP is less than potential GDP, then the economy is
A)in a full- employment equilibrium.
B)in a below full- employment equilibrium.
C)in a long- run equilibrium.
D)not in a short- run equilibrium.
E)in an above full- employment equilibrium.

Question

Quizplus · Accepted Answer

Potential GDP represents the level of output that can be produced when all factors of production are fully employed. If real GDP is less than potential GDP, then there are unused resources in the economy, indicating that the economy is in a below full-employment equilibrium.

If Real GDP Is Less Than Potential GDP, Then the Economy