When actual GDP goes below potential GDP, it means that
A. deflation is imminent.
B. economic activity has slowed.
C. economic activity has increased.
D. inflation is imminent.
Answer: B
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What is the Degree of Operating Leverage?
What will be an ideal response?
Using Figure 2 above, suppose that the economy started at PAE2. A potential change that could cause the economy to go from PAE2 to PAE3 might be:
A. taxes increase. B. interest rates increase. C. wealth level increases. D. domestic income increases.
GDP is the market value of:
A. all intermediate goods and services produced in an economy in a given year. B. all expenditures on consumption, investment, and net exports in an economy in a given year. C. all final goods and services produced in an economy in a given year. D. all expenditures on natural resources, labor, and capital goods in an economy in a given year.
If the wage rate increases and firms in a perfectly competitive industry are hiring labor, then
A. the firms will quit using labor. B. market supply will decrease. C. profits will increase. D. market price will decrease.