Consider the following statement: Real GDP and potential GDP are ...

[tuffie]

Consider the following statement: Real GDP and potential GDP are always equal. Is this statement true or false? Explain your answer.
 
  What will be an ideal response?

Question 2

Other things constant, which person is willing to save more?
 
  A) One that has a higher rate of time preference
  B) One that has a lower rate of time preference
  C) One that has no rate of time preference
  D) One that has no consideration about the value of goods now and in the future

[pikon]

Answer to Question 1

Real GDP often differs from potential GDP. Real GDP equals potential GDP only when the economy is at full employment. However, the economy is not always at full employment. When employment is less than full employment, real GDP is less than potential GDP and the economy is in a recession. When employment exceeds full employment, real GDP exceeds potential GDP and the economy is in an expansion.

Answer to Question 2

B