The GDP gap is:
a. the product of the potential real GDP and the equilibrium level of real GDP.
b. the distance between the current level of real gross domestic product and full employment real GDP.
c. the difference between potential real GDP and the equilibrium level of real GDP.
d. the difference between the present value of all of government's projected financial obligations and the present value of all projected future tax and other receipts.
e. the difference between the actual output of an economy and its potential output.
c
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Due to asymmetric information in credit markets, monetary policy may affect economic activity through the balance sheet channel, where an increase in the money supply
A) raises stock prices, lowering the cost of new capital relative to firms' market value, thus increasing investment spending. B) raises firms' net worth, decreasing adverse selection and moral hazard problems, thus increasing banks' willingness to lend to finance investment spending. C) raises the level of bank reserves, deposits, and bank loans, thereby raising spending by those individuals who do not have access to credit markets. D) lowers the value of the dollar, increasing net exports and aggregate demand.
A dairy produces and sells organic milk. Last year it sold 500,000 gallons of milk at a price of $7 per gallon. For last year, the firm's
a. total revenue was $3.5 million. b. economic profit was $3.5 million. c. accounting profit was $3.5 million. d. explicit costs were $3.5 million.