Short-run output is ( A ) when boom and ( B ) when recession.

Question

Short-run output is (  A   ) when boom and (  B  ) when recession.

BlackTom AI · Accepted Answer

Cyclical (short-run) output is above potential in a boom (positive) and below potential in a recession (negative).

1. Relevant knowledge points and concepts
- Short-run (cyclical) output refers to deviations of actual GDP from potential (or trend) GDP. Economists call this the output gap = actual GDP − potential GDP.
- A boom/expansion is a period when aggregate demand is strong and actual GDP exceeds potential; a recession is a period of falling demand when actual GDP falls below potential.
- By sign convention, a positive output gap means actual > potential (expansion/boom), and a negative output gap means actual < potential (recession).

2. Complete reasoning process step by step
- Define output gap: Output gap = Actual GDP − Potential GDP.
- Identify states: In a boom, aggregate demand increases, firms produce beyond normal capacity → Actual GDP rises above potential GDP.
- In a recession, demand falls, production is cut back → Actual GDP falls below potential GDP.
- Therefore the sign of the output gap aligns with the business cycle phase: boom → positive gap; recession → negative gap.

3. Intermediate/calculation illustration
- Suppose potential GDP = 100 (index).
- During boom: Actual GDP = 105 → Output gap = 105 − 100 = +5 (positive).
- During recession: Actual GDP = 95 → Output gap = 95 − 100 = −5 (negative).

4. Why the correct answer is correct
- The wording “short-run output” in macro contexts typically means the cyclical deviation from trend. Because booms push actual output above trend, the short-run (cyclical) component is positive; recessions push it below trend, making it negative.

5. Why other options would be incorrect
- Any alternative that reverses signs (e.g., “negative in boom, positive in recession”) contradicts the definition of the output gap.
- Describing both as “positive” or both as “negative” ignores the opposite directions of booms and recessions.

6. Conclusion
- Thus short-run output is positive when boom and negative when recession, confirming the provided answer (A: positive, B: negative).

Short-run output is ( A ) when boom and ( B ) when recession.单项选择题

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