Define potential GDP. Under what circumstances does actual real GDP fall short of potential GDP, equal potential GDP, and exceed potential GDP?
What will be an ideal response?
Potential GDP is the level of real GDP that the economy produces when it is at full employment. Potential GDP can be contrasted with actual real GDP, the amount of real GDP the country actually produces. Actual real GDP can be less than potential GDP when the economy is producing at less than full employment, that is, when there is less than full employment in the labor market. Actual real GDP equals potential GDP when the economy is producing at full employment. Actual real GDP can exceed potential GDP temporarily as the economy approaches and then recedes from a business cycle peak.
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Answer the following statements true (T) or false (F)
1. The budget line shows the various incomes that an individual can earn from different jobs. 2. The fundamental economic problem faced by a society is that productive resources are so varied and versatile, that it is hard to decide what to do with them. 3. The resource category called "land" includes forests, animals, and water resources. 4. When economists talk about the capital resources in the economy, they are referring to the amount of money circulating in the economy.
Suppose that in an industry, firm X has 50 percent market share, firm Y has 35 percent market share, and firm Z has 10 percent market share. Which of the following mergers is NOT likely to be challenged by the Federal Trade Commission?
A) a merger between firms X and Y B) a merger between firms Y and Z C) a merger between firms X and Z D) Any merger of two firms among those firms is likely to be challenged.