Title: QUIZ: Trend Growth -- GDP and Pizza Video Explainers
Course: FRE Resources > Section: Trend Growth -- GDP and Pizza Video Explainers

Q: Why does the economy have a potential growth rate?
- Because economic resources are scarce
- Because there is a shortage of labor in the United States
- Because wages are determined by the supply and demand of labor
- Because most companies cannot afford more capital goods
A: Because economic resources are scarce

Q: Which institution estimates potential output?
- The Federal Reserve Bank
- The Congressional Budget Office
- The Federal Trade Commission
- The U.S. Treasury Department
A: The Congressional Budget Office

Q: What is the difference between actual output and potential output referred to?
- The output indifference
- Net output
- The output gap
- The variance of output
A: The output gap

Q: The business cycle – expansions and contractions – is determined by:
- The short run fluctuations of actual output around potential output
- The long run growth of GDP
- The difference between the growth rate of the economy and interest rates
- The growth rate of the difference between actual and potential GDP
A: The short run fluctuations of actual output around potential output

Q: Why is it important to know if the economy is performing under potential?
- Because other countries will halt all trade if we are below our potential GDP
- Because the FOMC can take action to add stimulus to the economy if needed
- Because it affects the Presidential approval rating
- Because in the long run the economy cannot grow at all
A: Because the FOMC can take action to add stimulus to the economy if needed