If a new and better good replaced an older and less expensive ...

[nummyann]

If a new and better good replaced an older and less expensive good, then the price level measured by the CPI ________.
 
  A) is lower than the actual price level
  B) is higher than the actual price level
  C) might be either higher or lower than the actual price
  D) is the same as the actual price level because it measures the prices of the actual goods

Question 2

What is the relationship between actual and potential real GDP?
 
  What will be an ideal response?

[ecabral0]

Answer to Question 1

B

Answer to Question 2

Real GDP equals potential GDP when all resources are fully employed and there are no shortages that lead to inflation. Real GDP can be greater than potential GDP and can be less than potential GDP. During a business cycle, real GDP cycles around potential GDP. During an expansion, real GDP rises above potential GDP and during a recession real GDP falls below potential GDP.