Which of the Following Statements About Potential GDP Is False

question 72

Multiple Choice

Which of the following statements about potential GDP is false?

• A)The Fed's goal is to have equilibrium GDP close to potential GDP.
• B)When GDP is at potential, cyclical unemployment is zero.
• C)It occurs when firms are producing at their maximum level of output.
• D)It occurs when firms are producing with a workforce of normal size working normal hours.

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Definitions:

Leisure

Free time available to individuals when they are not engaged in work or essential activities, often used for relaxation or recreation.

Labor Supply Curve

A graphical representation that shows the relationship between the quantity of labor willing to be provided and the wage rate.

Nonlabor Income

Income received from sources other than direct employment or work, such as investments, pensions, or transfer payments.

Substitution Effect

The change in the quantity demanded of a good as consumers switch away from more expensive alternatives.