If the potential output of an economy is worth $440 billion and the actual output during a particular year was $435 billion, the output gap is
A)1.14 percent
B)2.2 percent
C)5 percent
D)1.1 percent

Question

If the potential output of an economy is worth $440 billion and the actual output during a particular year was $435 billion, the output gap is
A)­​1.14 percent
B)​2.2 percent
C)​­5 percent
D)​1.1 percent

Quizplus · Accepted Answer

The output gap is calculated as ((Actual Output - Potential Output) / Potential Output) * 100. Here, it is (($435 billion - $440 billion) / $440 billion) * 100 = -1.14 percent.

If the Potential Output of an Economy Is Worth $440