The Table Below Shows Data for Five Economies of Similar

question 45

Multiple Choice

The table below shows data for five economies of similar size.Real GDP is measured in billions of dollars.Assume that potential output for each economy is $340 billion.
TABLE 24-1
-Refer to Table 24-1.Which of the following statements best describes the situation facing Economy B?

• A)There is a recessionary gap of $40 billion and wages are falling slowly.
• B)There is an inflationary gap of $40 billion and wages are rising.
• C)There is a recessionary gap of $20 billion and wages are falling slowly.
• D)There is no output gap and wages are stable.
• E)There is an output gap of $20 billion and wages are rapidly adjusting.

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Definitions:

Efficient Market

A concept where all available information is fully reflected in asset prices, making it impossible to consistently achieve higher returns than the overall market through stock selection or market timing.

Security Prices

The current market price at which a particular security can be bought or sold.

Superior Returns

Financial gains that exceed the average market return or benchmarks, often sought by investors.

Relative Strength

A momentum investing technique that compares the performance of a security or index to the overall market or a specific benchmark.