Potential GDP Is

question 148

Multiple Choice

Potential GDP is

• A)the same as real GDP.
• B)the same as nominal GDP.
• C)another name for the Lucas Wedge.
• D)the level of output produced when the economy is fully employed.
• E)shows that the Okun Gap vastly exceeds the Lucas Wedge.

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Definitions:

Equilibrium Levels

The point at which market supply and demand balance each other, and as a result, prices become stable.

Real Interest Rates

Measures the borrowing cost of money after adjusting for inflation, providing a clearer view of the true cost of borrowing or the true yield on an investment.

Nominal Rate of Interest

The rate of interest before adjustments for inflation.

Inflation Rate

The speed at which the overall price level for goods and services increases, leading to a decline in buying power.