The Relationship Between Real GDP and Potential GDP Over the Business

question 18

Multiple Choice

The relationship between real GDP and potential GDP over the business cycle can be best summarised by which of the following statements?

• A) Real GDP cannot be greater than potential GDP.
• B) Real GDP cannot be less than potential GDP.
• C) Real GDP cannot be equal to potential GDP.
• D) Real GDP is always equal to potential GDP.
• E) Real GDP fluctuates around potential GDP.

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Definitions:

Null Hypothesis

A statement used in statistics that assumes no significant difference or effect exists in a set of observations.

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