The Rise and Fall of Real GDP Over the Course

question 99

Multiple Choice

The rise and fall of real GDP over the course of the business cycle suggests that

• A) the economy is always at full employment.
• B) the economy may not always be in long-run equilibrium.
• C) the economy is always at its potential output level.
• D) wage and price stickiness ensures that the economy moves from a peak to a trough.

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Definitions:

Aggregate Consumption

The total amount of goods and services consumed in an economy within a given period.

Consumption Function

A mathematical expression describing the association between gross national income and the total amount spent on consumption.

Least Squares Estimates

Least squares estimates are those that correspond to the smallest sum of squared distances, or errors.

Child Mortality

The statistical measure of the number of deaths of children under a certain age in a given population.