On a graph showing real national income on the vertical axis and time on the horizontal axis, the trend- line would probably be a good approximation of the
A)unemployment rate.
B)business cycle.
C)distribution of income.
D)inflation rate.
E)path of potential output.

Question

Quizplus · Accepted Answer

A trend-line on a graph of real national income over time would be a good approximation of the path of potential output, as potential output represents the level of real GDP that an economy can sustainably achieve over the long-run. The trend-line would capture the underlying growth rate of the economy, which is driven by changes in factors of production (such as capital and labor) and productivity. The other options (unemployment rate, business cycle, distribution of income, and inflation rate) are not directly related to the level of real national income over time.

On a Graph Showing Real National Income on the Vertical