China’s Output Gap

Answer the following questions to check your understanding of the story.

1) China’s economy is in which macroeconomic equilibrium?

a) Above full-employment equilibrium

b) Below full-employment equilibrium

c) Full-employment equilibrium

2) What is China’s approximate potential GDP?

a) Approximately 132 trillion yuan

b) Approximately 147 trillion yuan

c) Approximately 140 trillion yuan

d) 5.3% of 140 trillion yuan

3) Where does China’s short-run equilibrium occur in the AD–AS model?
At the intersection of the ___________.

a) the AD and SAS curves above potential GDP.

b) AD and the SAS curves at approximately 140 trillion yuan.

c) the AD and the SAS curves at potential GDP.

d) the AD and LAS curves at potential GDP.

4) Where does the long-run equilibrium occur in the AD–AS model?

At the intersection of the __________.

a) LAS, SAS and AD curves at approximately 132 trillion yuan

b) SAS and AD curves at approximately 140 trillion yuan

c) LAS, SAS and AD curves at approximately 140 trillion yuan

d) LAS, SAS and AD curves at approximately 147 trillion yuan

5) What is the output gap in China?

a) An inflationary gap of approximately 7 trillion yuan

b) A recessionary gap of approximately 7 trillion yuan

c) An inflationary gap of 147 trillion yuan

d) A zero output gap

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