How to find real output in fiscal policy
AP Macroeconomics · Learn by Concept
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AP Macroeconomics › How to find real output in fiscal policy
How does an increase in imports affect a nation's GDP?
An increase in imports does not affect a nation's GDP.
An increase in imports raises a nation's GDP.
An increase in imports decreases a nation's GDP.
Explanation
Using the GDP equation 
Which of the following is not a part of the business cycle?
Plateau
Expansion
Contraction
Trough
Explanation
The four phases of the business cycle are expansion, peak, contraction, and trough. A plateau is not one of these four phases.
A recessionary gap occurs when __________.
potential output exceeds real output
real output exceeds potential output
real output is equal to potential output
nominal output exceeds potential output
Explanation
A recessionary gap is defined as a situation in which real output is below potential output. In other words, the economy could be producing more than it is.
The answer choice "real output exceeds potential output" is incorrect; it describes an inflationary gap.
The answer choice "nominal output exceeds potential output" is incorrect; inflationary and recessariony gaps refer to real output levels, not nominal levels.