An Inflationary Output Gap Implies That

question 116

Multiple Choice

An inflationary output gap implies that

• A)the demand for all factor services will be relatively low.
• B)the intersection of AD and AS occurs at real GDP below potential output.
• C)the economy's resources are being used beyond their normal capacity.
• D)there is a pressure for wages to decrease.
• E)there is excess supply of most factors of production.

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Definitions:

Utility

A measure of satisfaction or happiness that consumers derive from consuming goods and services.

Train Tickets

Tickets that grant the holder the right to travel on a train service, typically specifying the journey details.

Diminishing Marginal Utility

Diminishing Marginal Utility is an economic concept stating that as a person consumes more of a good or service, the satisfaction (utility) gained from consuming each additional unit decreases.

Total Utility

The total satisfaction or benefit that a person receives from consuming a given total quantity of a good or service.