An inflationary gap occurs when
A. short-run aggregate supply falls, but other things remain constant.
B. the short-run equilibrium level of real GDP is greater than long-run aggregate supply.
C. the short-run equilibrium level of real GDP is less than long-run aggregate supply.
D. aggregate demand falls, but other things remain constant.
Answer: B
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Assume the firms in a perfectly competitive market are initially incurring economic losses. An increase in supply would cause existing firms' economic losses to decrease
Indicate whether the statement is true or false
Rising prices will discourage consumption and encourage conservation.
Answer the following statement true (T) or false (F)
The monopolistic competitor
A. produces a good or service that has no close substitutes. B. is usually a small firm. C. has very little competition. D. is protected by substantial barriers to entry.
If a positive permanent supply shock were to occur, the resulting equilibrium would be a:
A. higher level of output at lower prices. B. lower level of output and prices. C. higher level of output and prices. D. lower level of output at higher prices.