Question : 21) Which of the following true? A) Real GDP fluctuates around : 1240961

21) Which of the following is true?

A) Real GDP fluctuates around potential GDP.

B) Potential GDP fluctuates around nominal GDP.

C) Nominal GDP fluctuates around real GDP.

D) Real GDP never equals potential GDP.

E) The Okun Gaps are much larger than the Lucas Wedge.

22) Over the business cycle, real GDP fluctuates around

A) the business cycle trough.

B) the business cycle peak.

C) nominal GDP.

D) potential GDP.

E) the Lucas Wedge.

23) Which of the following statement or statements are correct about potential GDP?

i.Actual real GDP equals potential GDP when the economy is at full employment.

ii.Real GDP can be less than potential GDP.

iii.When real GDP equals potential GDP, it also equals nominal GDP.

A) i only

B) ii only

C) ii and iii

D) i and ii

E) i, ii, and iii

24) Choose which statement is most correct.

A) Real GDP can never exceed potential GDP.

B) Real GDP must always equal potential GDP.

C) At times, real GDP can exceed potential GDP.

D) Nominal GDP can never exceed potential GDP.

E) Nominal GDP must always equal potential GDP.

25) The amount of real GDP produced at any one time depends on

i)a fixed amount of capital.

ii)a fixed level of technology.

iii)decisions people make about leisure versus working.

A) ii only

B) ii and iii

C) i and ii

D) i only

E) i, ii and iii

26) The sustainable upper limit of real GDP is a level of GDP that is

A) greater than potential GDP, but by how much greater is unknown and controversial.

B) less than potential GDP, but by how much less is unknown and controversial.

C) potential GDP.

D) determined only by what is the full employment equilibrium in the labor market.

E) None of the above answers is correct because there is no sustainable upper limit to real GDP because real GDP can always be increased.

27) As an economic expansion approaches its peak, it is very likely that real GDP will

A) exceed nominal GDP.

B) exceed potential GDP.

C) equal nominal GDP but not potential GDP.

D) be less than potential GDP.

E) equal nominal GDP and equal potential GDP.

28) During a business cycle recession, it is very likely that real GDP will

A) exceed nominal GDP.

B) be less than potential GDP.

C) equal nominal GDP but not equal potential GDP.

D) equal nominal GDP and equal potential GDP.

E) be greater than potential GDP.

29) A country reports that its actual real GDP is greater than its potential GDP. It must be that

A) an error was made when calculating actual real GDP.

B) the price level is increasing.

C) more workers decided to quit work in order to enjoy leisure time.

D) the excess by which real GDP exceeds potential GDP is only temporary, and eventually real GDP will decrease to be equal to potential GDP.

E) None of the above answers is correct because it is impossible for a country’s real GDP to exceed its potential GDP.

30) A country’s potential GDP is determined, in part, by

A) the equilibrium price level.

B) demand and supply in the labor market.

C) the Lucas Wedge.

D) actual real GDP.

E) the Okun Gap.