Table 7-1 Table 7-1 Shows the Aggregate Demand and Short-Run

question 142

Multiple Choice

Table 7-1
Table 7-1 shows the aggregate demand and short-run aggregate supply curves for an economy. The potential level of output is $7.6 trillion.
-Refer to Table 7-1. What kind of gap, if any, exists and what is the size of the gap?

• A) No gap exists because the economy is in equilibrium.
• B) There is a recessionary gap of $0.8 trillion.
• C) There is a recessionary gap of $0.2 trillion.
• D) There is an inflationary gap of $1 trillion.

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Definitions:

Total Carrying Costs

The total expenses associated with holding inventory, including storage, insurance, taxes, and opportunity costs.

Optimal Amount

The most efficient, beneficial, or effective quantity of a resource, investment, or input to achieve a specific objective.

5 C's of Credit

The 5 C's of Credit refer to the five key factors that lenders consider when evaluating a borrower's creditworthiness: character, capacity, capital, collateral, and conditions.

Collateral

Assets pledged by a borrower to secure a loan or other credit, and subject to seizure in the event of default.