When the macroeconomic equilibrium is such that real GDP is less than potential real GDP, the economy is suffering from ________, and the government policy to eliminate this gap will ________ real GDP and ________ the price level
A) a recessionary gap; decrease; decrease
B) an inflationary gap; increase; decrease
C) a recessionary gap; increase; increase
D) an inflationary gap; decrease; increase
E) a recessionary gap; decrease; increase
C
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Which of the following statements correctly highlights a difference between real GDP and nominal GDP?
A) Real GDP includes the value of goods and services produced by foreign firms, while nominal GDP does not. B) Real GDP strips out the effect of changing prices on the value of goods and services produced, while nominal GDP does not. C) Real GDP includes the value of goods and services produced by domestic firms in foreign countries, while nominal GDP does not. D) Real GDP does not take into account the value of goods produced and also services provided, while nominal GDP takes these into account.
Explain how taxes are levied in a progressive income tax system and the rationale for choosing a progressive income tax structure
If a country's saving rate increases, then in the long run
a. productivity is higher but real GDP per person is not higher. b. real GDP per person is higher but productivity is not higher. c. productivity and real GDP per person are both higher. d. neither productivity nor real GDP per person is higher.
Refer to the graph below. All data are for the short run. If the product price is P2, the firm will:
A. Close down to avoid a loss
B. Produce Q2 units and make an economic profit
C. Produce Q5 units and break even
D. Produce Q2 units and suffer a loss