If the Full-Employment Level of Income in Figure 9

question 52

Multiple Choice

If the full-employment level of income in Figure 9.7 is $200 billion,there is

• A)A recessionary gap of $100 billion per year.
• B)A recessionary gap of $200 billion per year.
• C)An inflationary gap of $100 billion per year.
• D)Achievement of macro equilibrium.

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Definitions:

Supply

The total amount of a product or service that is available to consumers, determined by factors such as price, production costs, and market demand.

Allocative Efficiency

A state of the market where resources are allocated in a way that maximizes the net benefit to society, ensuring that every good or service is produced up to the point where the last unit provides a benefit equal to its cost of production.

Productive Efficiency

A situation where the economy or a production process is unable to produce more of one good without reducing the production of another good, using available resources in the best way.

Normal Goods

Goods for which demand increases as consumer income rises, and decreases as consumer income falls, reflecting a direct relationship between income and demand.