The output gap is the
A) percentage deviation of real GDP from potential GDP.
B) difference between actual inflation and core inflation.
C) percentage increase in the growth rate of real GDP minus the unemployment rate.
D) difference in graduation levels between high school and college.
E) percentage increase in the growth rate of real GDP.

Question

Quizplus · Accepted Answer

The output gap is defined as the difference between actual real GDP and potential real GDP. It is usually measured in percentage terms, which gives the percentage deviation of real GDP from potential GDP. Therefore, choice A is the best answer. Choice B is incorrect because it refers to the difference between actual and core inflation, which is not related to the output gap. Choice C is incorrect because it refers to a combination of the growth rate of real GDP and the unemployment rate, which is not the same as the output gap. Choice D is irrelevant to the concept of the output gap. Choice E is also incorrect because it only refers to the growth rate of real GDP, not the difference between actual and potential GDP.

The Output Gap Is the