If natural real GDP grows by $4b per yr. By how much must real GDP have risen after 2 yrs to close the gap?

Question

If natural real GDP grows by $4b per yr. By how much must real GDP have risen after 2 yrs to close the gap?

Answer 1

Let us assume that at the beginning, Natural real GDP was equal to Actural real GDP. Then in two years Natural real GDP would go up by $8b (2*$4b). So, in order to ensure that there is no gap between Natral Real GDP and Actual Real GDP, actual real GDP must rise by $8b.

If however the actual GDP fell short of the natural real GDP by $x billion at the begging of the two year period, to close the gap, actual real GDP must rise by $(8+x)b.

Note:potential output (also referred to as "natural gross domestic product") refers to the highest level of real Gross Domestic Product output that can be sustained over the long term. The existence of a limit is due to natural and institutional constraints. If actual GDP rises and stays above potential output, then (in the absence of wage and price controls) inflation tends to increase as demand exceeds supply. This is because of the limited supply of workers and their time, capital equipment, and natural resources, along with the limits of our technology and our management skills. Graphically, the expansion of output beyond the natural limit can be seen as a shift of production volume above the optimum quantity on the average cost curve. Likewise, if GDP is below natural GDP, inflation will decelerate as suppliers lower prices to fill their excess production capacity.

Potential output in macroeconomics corresponds to one point on the production possibilities frontier (or curve) for a society as a whole seen in introductory economics, reflecting natural, technological, and institutional constraints.

Potential output has also been called the "natural gross domestic product." If the economy is at potential, the unemployment rate equals the NAIRU or the "natural rate of unemployment."

Generally speaking, most central banks and other economic planning agencies attempt to keep GDP at or around the natural GDP level. This can be done in a number of ways: the two most common strategies are expanding or contracting the government budget (fiscal policy), and altering the money supply to change consumption and investment levels (monetary policy).

Answer 2

I would say it should rise for 2*4=8 billions, but actually seems like this question is too simple or there is some additional data missed.