In the above figure, point B depicts
A) an inflationary gap with real GDP in excess of potential GDP.
B) an inflationary gap with real GDP less than potential GDP.
C) a recessionary gap with real GDP in excess of potential GDP.
D) a recessionary gap with real GDP less than potential GDP.
A
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In calculating gross domestic product, the Bureau of Economic Analysis uses the sum of the market value of final goods and services produced. This means that the BEA
A) values goods at their market prices, multiplies them by the quantity produced, and then adds them up. B) values goods and services at their market prices, multiplies them by the quantity produced, and then adds them up. C) simply counts the total number of goods and services produced in the marketplace and then adds them up. D) simply counts the total number of goods produced in the market place and then adds them up.
A firm decides to hire more equipment if:
a. the average revenue it earns by selling its output is equal to its average cost. b. its total revenue is greater than the total cost of hiring the equipment. c. the marginal revenue product of the additional unit of equipment is greater than the marginal factor cost. d. its average revenue is greater than the average cost of hiring equipment. e. the price of its product is greater than the average cost of production.
According to the interest rate effect, an increase in the price level causes people to:
a) increase their money holdings, which increases interest rates and decreases investment spending. b) decrease their money holdings, which increases interest rates and decreases investment spending. c) to increases their money holdings, which decreases interest rates and decreases investment spending. d) to decrease their money holdings, which decreases interest rates and increases investment spending.
To operate efficiently, an economy generally "needs" ________ unemployment.
A. cyclical B. frictional C. structural D. seasonal