The GDP gap measures the amount by which:

All of the following are possible explanations for why it took so long for trade balances to respond to the depreciation of the dollar EXCEPT

A) the prior increase in the value of the dollar had padded the profit margins of foreign producers. B) foreign trade barriers made it impossible for the United States to substantially expand exports it bought. C) there were still impacts from earlier appreciations working through the system. D) exports began to increase from a much lower base than imports. E) None of the above. That is, A, B, C, and D are all correct.

Which of the following will most likely occur during the recovery phase of a business cycle?

A. Real GDP rises, and unemployment falls. B. Real GDP declines, and inflation rises. C. Interest rates rise, and the number of business failures rise. D. Inflation rises, and employment falls.