The Relationship Between Real GDP and Potential GDP Is That

question 35

Multiple Choice

The relationship between real GDP and potential GDP is that

• A)real GDP is always below potential GDP.
• B)real GDP always equals potential GDP.
• C)real GDP never equals potential GDP.
• D)real GDP fluctuates about potential GDP.

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Definitions:

Units-Of-Production Method

An accounting method of depreciation that allocates cost based on the actual usage or production levels of the asset.

Depreciation Expense

An accounting method used to allocate the cost of a tangible asset over its useful life.

Machine Hours

A measure of the operating time of a machine, used in costing and budgeting to allocate expenses based on usage.

Units-Of-Production

A depreciation method that allocates the cost of an asset over its useful life based on the number of units it produces.