An inflationary output gap is defined to be when the current level of output is:
A. high enough to cause an unexpected amount of inflation.
B. below full employment GDP.
C. above full employment GDP.
D. equivalent to full employment GDP.
Answer: C
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Refer to Table 5.2. This table shows the number of labor hours required to produce a bicycle and a harmonica in Germany and Sweden
a. Which country has an absolute advantage in the production of bicycles? b. Which country has an absolute advantage in the production of harmonicas? c. What is Germany's opportunity cost of producing one bicycle? d. What is Sweden's opportunity cost of producing one bicycle? e. What is Germany's opportunity cost of producing one harmonica? f. What is Sweden's opportunity cost of producing one harmonica? g. If each country specializes in the production of the product in which it has a comparative advantage, who should produce bicycles? h. If each country specializes in the production of the product in which it has a comparative advantage, who should produce harmonicas?
The key concept in the new classical approach to the aggregate supply curve is
A) the impact of imperfect information on business decisions. B) the impact of changes in the price level on real balances. C) the inverse relationship between the real interest rate and desired investment spending. D) the crowding out of investment spending by government spending.