Assume an economy moves from E1 to e2 to E3. Which of the following statements accurately describes the situation shown?
a. The economy is temporarily in an inflationary gap at E1.
b. At e2 the actual real GDP is less than the potential output.
c. The economy is in an inflationary gap at e2.
d. At e3 the price level has decreased from PL1.
Ans: C
c. The economy is in an inflationary gap at e2.
You might also like to view...
The quality change bias is most likely to put ________ into the CPI and so ________ the inflation rate
A) a downward bias; understate B) an upward bias; understate C) an upward bias; overstate D) a downward bias; overstate E) a random bias; randomly overstate or understate
The underground economy
a. includes mining production. b. is estimated by the government and the estimate is part of official GDP. c. includes production that uses illegal workers who are paid less than minimum wage. d. is measured by government officials through tax returns. e. is difficult to describe but easy to measure.