Mohammed Alfalasi - Quiz 6
Mohammed Alfalasi - Quiz 6
Mohammed Alfalasi - Quiz 6
Civilian Involuntary Loss in GDP Real GDP Potential GDP Loss in GDP
Year
Unemployment Unemployment (%) ($ billions) ($ billions) ($ billions)
The graph below shows the real and potential GDP for ten years from 2010 to 2019. In the starting years, the
Potential GDP is greater than Real GDP which indicates positive output gaps and resulted in loss of GDP. These
are called positive output gaps and they continued till 2017. Since, 2018, United States started to experience
negative output gaps, which means its Real GDP was more than its Potential GDP. Whether, its positive or
negative output gap, both are deemed to be inefficient. In positive output gap resources are lying idle and not fully
consumed while in negative output gap resources are over-consumed and a result both harm the economy.
However, when there is a negative output gap, frictional unemployment is more than the official unemployment.
Real vs Potential GDP
24000
22000
20000
18000
GDP ($ BILLION)
16000
14000
12000
10000
8000
6000
4000
2000
0
2010. 2011. 2012. 2013. 2014. 2015. 2016. 2017. 2018. 2019.
YEARS
In the following graph, Real and Potential GDP for 2020 have been incorporated and we can see that the negative
output gap has grown much more. This is even more inefficient as resources are over. It further demonstrates that
the official unemployment rate is lower than that of prior years' frictional rate of unemployment.
20000
15000
10000
5000
0
2010. 2011. 2012. 2013. 2014. 2015. 2016. 2017. 2018. 2019. 2020.
YEARS