What is the definition of the output gap?
What will be an ideal response?
When there is a difference between actual GDP and potential GDP, the difference is referred to as the output gap. Underemployment, unemployment, and unused resources can contribute to the output gap. Working at a job that requires much lower skills than what you are qualified for is underemployment, which results in underutilized resources (your skills). Because your skills are not used, actual productivity is less than potential productivity, creating the output gap.
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Which of the following best defines capital as a factor of production?
A) the gifts of nature that businesses use to produce goods and services B) the knowledge and skills that people obtain from education and use in production of goods and services C) financial assets used by businesses D) instruments, machines, and buildings used in production
Which of the following helps in preventing firms in the U.S. from forming collusive agreements?
A) The low demand faced by colluding firms B) The antitrust policy of the government C) The high rate of corporate income taxes D) The low profit earned by firms after colluding
If the price of apples decreases by 2 percent and causes apple consumption to increase by 4 percent, the price elasticity of demand is ____, indicating the demand is ____.
A. 2; elastic B. 2; inelastic C. 0.5; elastic D. 0.5; inelastic
Which of the following appears as a liability on the Federal Reserves balance sheet?
A) U.S. government securities owned outright B) Commercial bank deposits C) Gold certificates D) Cash items in the process of collection