The Gap Between Actual and Potential Output

question 12

Multiple Choice

The gap between actual and potential output

• A) is a measure of the costs of inflation.
• B) is a measure of what it costs society to tolerate less than full employment.
• C) is necessary to ensure economic efficiency.
• D) has always been positive.
• E) is calculated as 3 × (unemployment rate - 0.055) × potential GDP.

---

Definitions:

Quantity Supplied

The total amount of a specific good or service that producers are willing and able to sell at a given price over a specified period.

Supply Curve

A graphical representation of the relationship between the price of a good or service and the quantity supplied, typically upward sloping.

Input Prices Rising

A condition where the costs of the raw materials and components needed for production increase.

Fall in the Price

A decrease in the market price of a good or service over a specific period of time.