Explain the relationship between real GDP and potential GDP ...

[yoroshambo]

Explain the relationship between real GDP and potential GDP during the two phases of the business cycle.
 
  What will be an ideal response?

Question 2

The implicit rental rate for capital is
 
  A) an accounting cost.
  B) part of the firm's normal profit.
  C) an opportunity cost.
  D) a cost that is irrelevant to the business.

[Carliemb17]

Answer to Question 1

During an expansion the level of real GDP eventually surpasses potential GDP, reaches a peak and subsequently falls below potential GDP during a recession eventually reaching a trough.

Answer to Question 2

C

[yoroshambo]

YES! Correct, THANKS for helping me on my review

[Missbam101]

Thanks for the timely response, appreciate it