Economic Performance

Question 1

Explain output gaps

Answer 1

Negative: “When the actual level of real GDP is less than the potential underlying level of GDP”
(spare capacity, demand-deficient unemployment, d-p inflationary pressure low)
Positive: “When the actual level of real GDP is greater than the potential underlying level of GDP”
(temporarily producing beyond productive potential, workers paid overtime, short time, inflationary pressure)

Question 2

What are the 5 types of unemployment?

Answer 2

1-Frictional
2- Structural
3- Cyclical
4- Seasonal
5- Real-wage