1). Potential GDP refers to
A) The level of GDP attained by the country with the highest growth in real GDP in a given year.
B) The level of GDP that would be achieved if government spending did not crowd out private sector spend in .
C) The egwnt to which real GDP is above or below nominal GDP.
D) The level of GDP attained when all ?rms are producing at capacity.
E) The difference between the highest level of real GDP per quarter and the lowest level of real GDP per
quarter within any given year.
2). The output gap is
A) A measure of potential output.
8) Negative if potential GDP is larger than real GDP.
C) Negative if potential GDP is smaller than real GDP.
D) Constant throughout the business cycle.
E) Shrinking all the time.
3). The only way the standard of living of the average person in a country can increase is if increases faster than .
A) production; population
B) population; income
C) debt; GDP per capita
D) population; GDP per capita
E) population; production
4). Increasing the amount of consumption spending and reducing the amount of savings
investment expenditures, and long-run economic growth in the economy.
A) decreases; increases
B) decreases; decreases
C) increases; increases
D) increases; holds constant
B) increases; decreases
